The offshore oil supply industry in its main British service base

The preceding chapter's discussion of the transaction cost theory of the multinational corporation, together with Chapter 4's description of the internationalized technological core of offshore oil supply industry, leads one to expect that certain features will be present in a given offshore oil supply service base. We will call these expectations ‘propositions’ and we want to see if they are supported by the evidence. Attention here will focus on the Aberdeen area of north-east Scotland where, in the early 1970s, a major service base was established to serve the British sector of the northern North Sea oil province. We may list the propositions as follows:

Since it has been established as a matter of theory that the companies in the technological core prefer to service overseas markets by establishing affiliates, then affiliates (rather than headquartered firms) will predominate in a supply base.

Since oil companies, as buyers, require, for transaction cost reasons, that suppliers are located in close proximity to their own facilities and since market failure is thought not to be a problem, independently owned affiliates will serve in an oil province.

Since American companies predominate in the global industry, American ownership groups ¹ will be found in the technological core of the offshore oil supply industry while indigenous firms will be found mainly as providers of locationally determined inputs.

Since the American offshore oil supply firms follow on the heels of the oil companies, American affiliates in the technological core will be among the first to arrive in a new supply-base.

Since American leadership in the offshore oil supply industry is at least partly based upon firm-specific advantages, patent ownership will be more prevalent with them than with the non-American firms.

Since there is no evidence of a decline in the American leadership role in the offshore oil supply industry, American ownership groups will be at least as research and development intensive as the less specialized ownership groups.

Since affiliates are established to serve oil companies’ needs in different oil provinces, it is unlikely that a given affiliate will be an important decision-making centre for an ownership group in the wider global industry.

Since the leading offshore supply companies have affiliates in many countries, any given affiliate in the technological core is unlikely to be important (as measured by share of sales) within its ownership group.