Oil & Gas Arbitrage: The Market Finds a Way
Our fifth paper of 2025…
OUR PRELIMINARY SPECIFICATION MAKES SHALE COMMERCIAL. THROUGH AN INNOVATIVE BUSINESS MODEL SUPPORTING THE JOINT OPERATING COMMITTEE, WE PROVIDE OIL AND GAS ASSETS WITH THE MOST PROFITABLE MEANS OF OIL AND GAS OPERATIONS, EVERYWHERE AND ALWAYS. ENABLING THEM TO ACHIEVE ACCOUNTABLE AND PROFITABLE NORTH AMERICAN ENERGY INDEPENDENCE. OIL AND GAS’ VALUE PROPOSITION IS AT A MINIMUM, LEVERAGED TO THE POINT OF 10,000 MAN HOURS PER BOE. WE KNOW WE CAN, AND WE KNOW HOW TO MAKE MONEY IN THIS BUSINESS.
Our fifth paper of 2025…
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As promised our paper looks at the dynamic interactions that are a result of People, Ideas & Objects use of Hyper Specialization, Artificial Intelligence, and Intellectual Property for our user community and their service providers. The paper entitled…
This is our third paper of 2025 that deals exclusively with our user community and their service providers. Download your copy here before all the shooting starts again.
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I’m pleased to confirm that our February 10, 2025, paper—
will be published on schedule.
I can also announce a fourth deliverable for 2025, slated for release on March 17, 2025, under the current working title:
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From the perspective of structuration theory, adaptation is the joint effect of the actions of individuals and the institutional structures which those actions take place. Structures such as business strategies, organizational culture, reward and control systems, patterns of communication, and professional norms both enable and constrain the daily activities of people, but do not wholly determine them.
It is the other way round: man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether different, type of civilization, something like the "state" of the termite ants, or some other altogether unimaginable type.
Let’s take a closer look at the nature of the “gaps” involved. Adam Smith tells us in the first sentence of The Wealth of Nations that what accounts for “the greatest improvement in the productive power of labour” is the continual subdivision of that labor (Smith 1976, I.i.1). Growth in the extent of the market makes it economical to specialize labor to tasks and tools, which increases productivity – and productivity is the real wealth of nations. As the benefits of the resulting increases in per capita output find their way into the pockets of consumers, the extent of the market expands further, leading to additional division of labor – and so on in a self-reinforcing process of organizational change and learning (Richardson 1975; Young 1928). p. 7
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Labels: Dosi, Innovation, Research, Review
With this post we have completed the review of Professor Giovanni Dosi’s 1988 paper “Sources, Procedures and Microeconomic Effects of Innovation”. After this post I will have some closing comments and a review of the papers highlights in future posts.
Characteristics of Innovation and Patterns of Industrial Change.
Professor Dosi states that the rate of change and observed dynamics of industrial performance can be attributed to the following components:
Innovative learning by single firms augmented by universities and government agencies.
The diffusion of innovation, the knowledge of innovative products and processes.
First, the empirical variety in the patterns of industrial change is explained by different combinations of selection, learning, and diffusion and different learning mechanisms. (p. 1159)
Second the nature of each technological paradigm, with its innovative opportunities, appropriability conditions and so on help to explain the observed inter-sectoral differences in the importance of the above three processes. (p. 1159)
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Labels: Dosi, Innovation, Research, Review
Returning to our review of Professor Giovanni Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” in the Journal of Economic Literature Vol. XXVI (September 1988), pp. 1120 - 1171. Recall this review of Dosi was part of our overall review of the Preliminary Research report; of which we have been aggregating all of these review posts under this blogs label “Review”. I highly recommend reviewing Professor Dosi material in detail. His 1988 paper has become one of the critical resources in the area of innovation and our use of this document was instrumental in determining the Joint Operating Committee is the key organizational construct of the innovative oil and gas producer.
Innovation and Industrial Change: Learning and Selection
A. The Innovation Process and Industrial Structures
In this post Professor Dosi asserts that the makeup of industries and companies is attributable not only to the endogenous force of competition. Innovation and imitation also make up the fundamental structure of an industry. “Market structure and technological performance are endogenously generated by three underlying sets of determinants.”
Each of these three components is evident in the marketplace of an oil and gas producer today as reflected in:
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Labels: Dosi, Innovation, Research, Review
As technical paradigms are introduced companies accept and use these innovative capabilities at different rates. This rate of acceptance can be classified as early innovators, imitators and fence sitters. Thus a satisfactory understanding of the relationship between innovation and distribution of firms structural and performance characteristics also implies an analysis of the learning and competitive process through which an industry changes.
We have also seen over the past twenty years an interesting trend that has created significant differences in the stratification of the oil and gas industry in terms of the size of the producer and their associated innovativeness. The small organization was able to purchase reserves and facilities from the open market, or their previous owners, only to substantially increase the inherent value through increased production and / or performance. We can conclude that the bureaucracy inherent in the hierarchy had stifled the innovativeness in the larger organizations and most disturbing is the lack of concern or identification of this as an issue over the past number of decades.
Professor Dosi notes;
Finally, empirical studies often show the coexistence, within the same industry and for identical environmental incentives, of widely different strategies related to innovation, pricing, R & D, investment and so on. Specifically with regard to innovation one notices a range of strategies concerning whether or not to undertake R & D; being an inventor or an early imitator, or “wait and see”; the amount of investment in R & D; the choice between “incremental; and risky projects, and so on (see Charles Carter and Bruce Williams 1957; Freeman 1982 and the bibliography cited therein). Call these differences behavioral diversity. p. 1157Changing the innovative behaviour of one producer carries a scope of change that is as broad and as diverse as is contemplated in the business world. Change at this scale in many instances can not be managed within the organization but needs to be managed through the forces of creative destruction in the greater economy. A time of dynamic change driven by the organizational changes focused around the innovative Joint Operating Committee.
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Labels: Dosi, Innovation, Research, Review
Professor Giovanni Dosi notes that most of the innovation occurring during the industrial revolution had been via the “technical trajectories of increasing mechanization of production and increasing exploitation of economies of scale.” However, these innovations have been on the basis of the "trade-offs between volume of production and flexibility of the production lines."
Robotics has had a tremendous impact on the makeup and mix of production runs and flexibility, the efficiency of small production runs, and the likely increase in the importance of plant related economies of scale.
Therefore it is concluded by Dosi that the increased flexibility afforded by robotics and automation, motivated primarily through the more speculative nature of demand prediction, has had the effect of decreasing the productivity effect of additional innovations. Ultimately, however, the expectation of the innovations effect is that it will move the costs lower over the smaller production volumes. We are now clearly seeing this in the innovation and diversity of offerings in the vehicle industry. (Greater costs being allocated over smaller production runs.)
In oil and gas we see what might be considered a parallel situation. The business cycle is more dependent on the reserve life of new reserves. With rapid three-year declines, specifically in gas, the question becomes: is this a product of the cumulative innovativeness in exploiting the technologies that have developed? Or, is the use and application of oil and gas technology yet to be tested against a more exploration style mindset consistent with the risk - reward of the current market pricing of the commodities.
Either way it appears that the exploration and exploitation of oil and gas reserves has and always will be a function of the technology based on the underlying sciences. This is undeniable, and may also be the cause of the shorter-term life cycle and diminished size of new reserves, which is agreed by most to be a trend that will continue. This reserve size and deliver-ability is paralleled in Dosi’s discussion of how innovations in industrial companies have been diluted by demand prediction and lower production volumes. Scientific and engineering innovations accelerating the extraction of oil and gas reserves and this trend continuing for the foreseeable future.
For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
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Labels: Dosi, Innovation, Research, Review
We return to our review of Professor Giovanni Dosi’s “Sources, Procedures, and Microeconomic Effects of Innovation”. Earlier we noted that the Joint Operating Committee (JOC) is the ideal or key organizational construct for innovation. There an innovation framework operates in alignment with the legal, financial, operational decision making, cultural and communication frameworks of the Joint Operating Committee. And if we moved the compliance and governance frameworks from the hierarchy into alignment with the six frameworks of the JOC, as People, Ideas & Objects suggests in the Draft Specification, we would achieve a greater speed, accountability and ‘innovativeness’ in the business of the oil and gas producer.
Professor Dosi discusses the phenomenon introduced earlier in our review when he asks, “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities, or both?”, and now considers the relationship between innovative activities and the dynamics of industrial structures and performance. Why do some companies attain greater value from Innovation?
Professor Dosi (1988) reference to the Schumpeterian hypothesis, “that bigness is relatively more conducive to innovation, that concentration and market power affect the propensity to innovate” and his rejection of that premise is evident in this paper’s following three points.
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Labels: Dosi, Innovation, Research, Review
Our review of the Preliminary Research Report, Professor Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” and the Draft Specification is providing evidence to answer two of our research questions. I think it is becoming clear that innovation can be the result, as our first research question asks, of a quantifiable and replicable process. What also is becoming clear is the lack of the processes that facilitate innovation, will most certainly lead to a lack of innovation. That to leave the process of innovation to chance is irresponsible, reckless and bound to fail.
The second research question we are seeing the answer to; is the Joint Operating Committee is the optimal organizational construct to identify and support innovation. Building the systems that support the legal, financial, operational decision making, cultural and communication frameworks of the JOC is our focus. However, what I am realizing is that innovation is also a framework of the JOC. That is to say we should be stating that the Joint Operating Committee is the legal, financial, operational decision making, cultural, communication and innovation framework of all producers. As a result of this realization I have changed the header to this blog to reflect this change.
Continuing with our review of Professor Dosi’s paper, he begins by summarizing that businesses commit to innovation stemming from exogenous scientific factors and endogenously accumulated capabilities developed by their respective firms. His general point is that “observed sectoral patterns of technical change are the result of the interplay between various sorts of market-inducements, on the one hand, and opportunity and appropriability combinations, on the other”. p. 1141
What opportunities are and will be constrained by not adopting a more innovative organizational structure? If the geological and engineering sciences progress in a substantial manner in the next few years, how will oil and gas companies adopt, employ, test, and prove these science's development without an enhanced capacity to innovate? How much of the drive towards innovation is the beginning of the understanding necessary to expand the science? How much of an inducement are the current commodity prices providing the global competition to innovate? Until producers capture these “appropriabilities” within their ERP systems, such as the Draft Specification does, innovation will be left to chance.
I am not asserting that efforts in the past were not innovative or moved the science substantially. The issue People, Ideas & Objects is raising is that the pace and speed of the science’s development in the near to mid-term, and particularly the long term, will accelerate based on the fact that, globally, reserve replacement continues to be progressively more challenging, and the prices realized for the commodities have begun to reflect these challenges. Professor Dosi (1988) concludes this section with “Finally, the evolution of the economic environment in the longer term, is instrumental in the selection of new technological paradigms, and, thus in the long term selection of the fundamental directions and procedures of innovative search.” p. 1142
For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
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Labels: Dosi, Innovation, Research, Review
In our review of Professor Giovanni Dosi’s paper, “Sources, Procedures, and Microeconomic Effects of Innovation“ we now ask what are the incentives to invest in the discovery of innovations and there development? Will these depend on the incentives that interested and motivated agents perceive in terms of expected economic returns? Professor Dosi calls “appropriability those properties of technological knowledge and technical artifacts, of markets and the legal environment that permit innovations as rent yielding assets against competitor’s imitation”.
Professor Dosi (1988) notes a study conducted by Richard Levin et al 1984, in which they studied “the varying empirical significance of appropriability devices of (a) patents, (b) secrecy, (c) lead times, (d) costs and time required for duplication, (e) learning curve effects, (f) superior sales and service efforts.” Professor Dosi (1988) observed, “that lead times and learning cures are relatively more effective ways of protecting process innovations, and patents a more effective way to protect product innovations.” Dosi concludes. “Finally, there appears to be quite significant inter-industrial variance in the importance of the various ways of protecting innovations and in the overall degrees of appropriability”. (p. 1139)
Oil and gas producers are focused on process innovations, industry suppliers on product innovations. Recognizing this division of labor is how People, Ideas & Objects Resource Marketplace module provides and facilitates a greater interaction between producers and suppliers. Each group is concerned with securing their innovative capabilities without creating any conflict with the other. (The producer looking to lead times, learning curves while suppliers using patents to protect their innovations and capabilities.)
Levin states that the control of complementary technologies becomes a “rent-earning firm-specific asset”. Professor Dosi (1988) states “in general, it must be noticed that the partly tacit nature of innovative knowledge and its characteristics of partial private appropriability makes imitation a creative process, which involves search, which is not wholly distinct from the search for new development, and which is economically expensive - sometimes even more expensive then the original innovation, and applies to both patented and non-patented innovations.” (p. 1140)
With the fast changing science and technological paradigms and steep trajectories of the industry, the need to have the capability to innovate will be needed for each producer to develop on their own. If the costs of duplication are as steep as the costs of developing the internal capabilities, the producers should then rely on their process innovations to carry their firm. However, that also imputes that a greater level of co-dependency exists. Partners in the Joint Operating Committee will have resources available to commit to the projects and suppliers will have contributions as well. As the Resource Marketplace module seeks to eliminate the redundant and mutually exclusive capabilities being built within each silo’d corporation. The proposed alternative in the Draft Specification is to rely on the marketplace for development and deployment of these innovations.
To restate this another way. With the dual constraints of; the difficulty in increasing the volume of earth science and engineering resources in a material way, and secondly, the demand for greater volumes of science and engineering in each barrel of oil, the need for the producer to rely on the “market” (within the Resource Marketplace module) to define and support their innovative appropriability is a necessity. A means to effectively pool and manage the technical resources made available through the participants in the Joint Operating Committee and service industries, as contemplated in the Resource Marketplace module and Military Command & Control Metaphor.
For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
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Labels: Dosi, Innovation, Research, Review
And we’re back from a refreshing break. When we look at the decision to implement a new and innovative idea within an oil and gas property, we look to determine where the decision rights reside. In oil and gas the operational decision making authority resides with the Joint Operating Committee. Therefore to increase a firm or industries innovative-ness we have to move the technological and science based innovations closer to the decision making authority in order for them to be implemented. Whereas there may be a meeting of the minds on the course of actions to take, understandably this is also the area where the bureaucracy lurks. Time, or the pace of turnover of these processes, also becomes a critical issue.
In today’s post we will be continuing on with our look at technological paradigms and the effect they have on scientific and innovative trajectories in oil and gas. When discussing these points on innovation, it is important to remember that the sciences, the trajectories they are on, and the opportunities they generate for a producer, are accelerating and will continue to do so. Recognizing the Joint Operating Committee as the key organizational construct, as is done in the Draft Specification, is the means to deal with these scientific paradigms and trajectories, and hence, an area where significant process automation can and will take place through the development of People, Ideas & Objects software applications.
With this process in mind, we note that Professor Dosi suggests two separate phenomenon are observed:
Similarly, new technological paradigms, directly and indirectly -- via their effects on “old” ones -- generally prevent the establishment of decreasing returns in the search process for innovations. p. 1138Looking to model the management of this process across all producers within all geographical regions would seem to be a difficult task. However, Professor Dosi notes that there are other serious concerns that need to be taken into consideration.
The appearance of new paradigms is unevenly distributed across sectors and so are (a) the degrees of technical difficulties in advancing production efficiency and product performance, and (b) the technological competence to innovate, embodied in people and firms. pp. 1138 - 1139Simply not everyone will be working off the same page when it comes to the types of innovation, the scale of their application and degree of complexity. In this next quotation it becomes clear that the process under management by the software is the means in which to be able to deal with these underlying paradigms and trajectories. Therefore, in order for the producers to begin the path of innovativeness requires that we resolve these process design issues, and build the software before they are implementable.
These distributions of opportunities and competence, in turn are not random, but depend on (a) the nature of the sectoral production activities, (b) their technological distance from the “revolutionary core” where new paradigms are originated, and (c) the knowledge base that underpins innovation in any one sector. p. 1139People, Ideas & Objects believes that if we engineer a software application to deal with these issues, we can accelerate the performance of the producer and the industry. From a systems engineering point of view this has been beyond the scope of one software development team working with one producer. For any producer to undertake the required analysis, let alone development of the systems, is beyond the scope of what was possible or desirable. It is well beyond the scope of any software developer to undertake on their own, in a speculative manner, and therefore has been beyond the imaginations and possibilities of the industry. I would also argue that, in the past, automation of this business process would have generated limited value. Today we can define a more specific division of labor and specialization and therefore, provide a more profitable means of oil and gas operation.
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Labels: Dosi, Innovation, Research, Review
I think it would be easy to attain a consensus that the underlying earth science and engineering, which is the basis of the competitive advantage of the oil and gas producer, is on a steep upward trajectory. The past few years has demanded more engineering and earth science per barrel of oil, and the complexity or difficulty of those inputs are on their own separate but related trajectory. The science of oil and gas will be the means in which producers are able to attain the market demand for energy. In this post Professor Dosi shows how these trajectories are affected by technological paradigms.
Technological paradigms have been directly linked with major scientific breakthroughs, form the discovery of the transistor to the development of modern computer technologies. Professor Dosi states that these links between science and technology have been evident since the days of Leonardo da Vinci and Galileo. What was unique to the 20th century was that the need to generate and utilize scientific knowledge, was internal to, and often a necessary condition of the development of new technology paradigms. Up until the end of the 19th century, most technological innovations were the development of imaginative craftsmen. Many of the 20th century development were the results of multiple disciplines, such as physics and microelectronics, whose scientists were awarded the Nobel Prize in 1962 for the semi-conductor.
Professor Dosi concludes that scientific input into the innovation process is evidence of the importance of factors exogenous to competitive forces among private economically motivated actors. This is subject to two important qualifications.
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Labels: Dosi, Innovation, Research, Review
We move back to our review of the Preliminary Research report and pick up with Professor Giovanni Dosi’s 1988 paper “Sources, Procedures, and Microeconomic Effects of Innovation.” Last Monday we discussed the difficulty and complexity in identifying and supporting innovation within an oil and gas firm. How both the science and business aspects of the firm need to be addressed. Today we discuss application of our factor of revenue per employee in identifying the level of innovativeness within the firm and / or Joint Operating Committee, and comparing it within a cluster of producers in which a firm competes. A cluster being the larger grouping of producers that are oriented to a single geographical region. People, Ideas & Objects believes that competitiveness between and within clusters will become more of a focus of producer firms. It should also be questioned that in the search for oil and gas, how much of the scientific capability of a producer is dependent on a standard or historical basis of competitive understanding and capability, and how much is based on a future understanding of cooperation within a cluster and / or competition against unknown and unseen global participants? Dosi notes.
In general, each organizational arrangement of a firm embodies procedures for resource allocation to particular activities (in our case, innovative activities), and for the efficient use of these resources in the search for new products, new processes, and procedures for improvements in existing routines; however, the specific nature of these procedures differs across firms and sectors. For example, the typical degrees of commitment of resources vary by industry and so do the rates at which learning occurs. I now turn to the interpretation of these phenomena. p. 1135Professor Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Professor Dosi introduces the theory of Schmookler (1966) and asked “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovate inputs.
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Labels: Dosi, Innovation, Research, Review
People, Ideas & Objects focus is on providing ERP systems based on using the Joint Operating Committee as the key organizational construct of the innovative producer. The reason for doing this is to support the innovative oil and gas producers in the difficult processes of identifying and supporting innovation. In this first quotation, I find Professor Dosi has captured the difficulty the producer faces in the scientific and business processes of the firm.
In general the uncertainty associated with innovative activities is much stronger than that with which familiar economic model deals. It involves not only lack of knowledge of the precise cost and outcomes of different alternatives, but often also lack of knowledge of what the alternatives are (see Freeman 1982; Nelson 1981a; Nelson and Winter 1982).
In fact, let us distinguish between (a) the notion of uncertainty familiar to economic analysis defined in terms of imperfect information about the occurrence of a known list of events and (b) what we could call strong uncertainty whereby the list of possible events is unknown and one does not know either the consequences of particular actions for any given event (more on this in Dosi and Egidi 1987).
I suggest that, in general, innovative search is characterized by strong uncertainty. This applies, in primis to those phases of technical change that could be called pre-paradigmatic: During these highly exploratory periods one faces a double uncertainty regarding both the practical outcomes of the innovative search and also the scientific and technological principles and the problem-solving procedures on which technological advances could be based. When a technological paradigm is established, it brings with it a reduction of uncertainty, in the sense that it focuses the directions of search and forms the grounds for formatting technological and market expectations more surely. (In this respect, technological trajectories are not only the ex post description of the patterns of technical change, but also, as mentioned, the basis of heuristics asking “where do we go from here?”) p. 1134Lets be clear, the uncertainty resides in both the scientific and business realms. I am not of the opinion that the two can be separated, as is done in other systems such as SAP. This is maybe why the industry has been poorly served, in my opinion, by the business systems that operate today. They don’t recognize the innovative and science basis of the business.
However, even in the case of “normal” technical search (as opposed to the “extraordinary” exploration associated with the quest for new paradigms) strong uncertainty is present. Even when the fundamental knowledge base and the expected directions of advance are fairly well known, it is still often the case that one must first engage in exploratory research, development, and design before knowing what the outcome will be (what the properties of a new chemical compound will be, what an effective design will look like, etc.) and what some manageable results will cost, or, indeed, whether very useful results will emerge. p. 1135Add to this situation the complexity of interactions of the producers that are represented in the JOC and we begin to see the difficulty expressed by Professor Dosi. Having misaligned frameworks where the bureaucracy is attuned to only compliance and governance of the firm. Is the easy way to deal with the complexity and difficulty in this business. In other words just ignore it. This is how you have CFO’s stand up at the annual meeting and state that, on a budget basis, the firm will produce an additional 10% next calendar year. Dosi notes;
As a result, firms tend to work with relatively general and event-independent routines (with rules of the kind “... spend x% of sales on R & D,” ... distribute your research activity between basic research, risky projects, incremental innovations according to some routine shares ...” and sometimes meta-rules of the kind “with high interest rates or low profits cut basic research,” etc.). This finding is corroborated by ample managerial evidence and also by recent more rigorous econometric tests; see Griliches and Ariel Pakes (1986) who find that “the pattern of R & D investment within a firm is essentially a random walk with a relatively low error variance” (pp. 10 - 11). In this sense, Schumpeter’s hypothesis about the routinization of innovation (Joseph Schumpeter 1942) and the persistence of innovation-related uncertainty must not be in conflict but may well complement each other. As suggested by the “late” Schumpeter, one may conjecture that large-scale corporate research has become the prevailing form of organization of innovation because it is most effective in exploiting and internalizing the tacit and cumulative feature of technological knowledge (Mowery 1980; Pavitt 1986). Moreover, companies tend to adopt steady policies (rules), because they face complex and unpredictable environments where they cannot forecast future states of the world, or even “map” notional events into actions, and outcomes (Dosi and Orsenigo 1986; Heiner 1983, 1988). Internalized corporate search exploits the cumulativeness and complexity of technological knowledge. Together with steady rules, firms try to reduce the uncertainty of innovative search, without however, eliminating it. pp. 1134 - 1135Such was the state of business in 1988 for Professor Dosi. I would argue that the luxury of time in 2010 doesn't exist. Given all the time and all the resources we are able to achieve great things. Dealing with the real world constraints of the science of oil and gas in this business has to be purposely addressed. That is the business of People, Ideas & Objects in developing the systems defined in the Draft Specification.
Internalization and routinization in the face of the uncertainty and complexity of the innovative process also point to the importance of particular organizational arrangements for the success or failure of individual innovative attempts. This is what was found by the SAPPHO Project (cf. Science Policy Research Unit 1972 and Rothwell et al. 1974), possibly the most extensive investigation of the sources of commercial success or failure of innovation: Institutional traits, both internal to the firm - such as the nature of the organizational arrangements between technical and commercial people, or the hierarchical authority within the innovating firm - and between a firm and its external environment - such as good communication channels with users, universities, and so on - turn out to be very important. Moreover, it has been argued (Pavitt 1986; Robert Wilson, Peter Ashton and Thomas Egan 1984) that, for given incentives and innovative opportunities, the various forms of internal corporate organization (U form versus M form centralized versus decentralized, etc.) affect innovation and commercial success positively or negatively, according to the particular nature of each technological paradigm and its stage of development. p. 1135For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
Posted by Paul Cox at 12:28 AM 0 comments
Labels: Dosi, Innovation, Research, Review
Today’s post leads ultimately to the difficulty for the producer in defining where the boundary of the firm and markets begin and end. Much research has been conducted in this area, and the Draft Specification draws a definitive line between the firm and the marketplace. There the marketplace is represented in the Joint Operating Committee. The primary reason for this definition of the boundary of the firm and marketplace is the proprietary earth science and engineering capability and information that the producer firm holds.
The question therefore becomes how is this proprietary information and capability deployed on an as needed basis. Professor Dosi notes that although the free movement of information has occurred in industries for many years, yet has never been easily transferable to other companies within those industries. The ability to replicate a competitive advantage from one company to another is not as easy, and may indeed be not worthwhile doing. Dosi (1988) goes one step further and states, “even with technology license agreements, they do not stand as an all or nothing substitute for in house search.” A firm needs to develop “substantial in-house capacity in order to recognize, evaluate, negotiate and finally adapt the technology potentially available from others.” Therefore why not focus on the need to increase the companies own unique and specific competitive sources and directions.
This also imputes that the free flow of information between producers through collaborations in the Joint Operating Committee would increase the knowledge, yet not expose anyone of the specific organizations to any specific losses of key knowledge, proprietary information or capability.
Information’s shelf life expires faster each day. Knowledge and information need to be employed and deployed where and when they are required. This research’s collaborative method of employing the intellectual property might facilitate a greater value, to the participating producer, and would provide the groundwork for future innovations and expansion of the underlying engineering and earth sciences. And although no specific proof of this can be sourced at this time, today’s hierarchical organizational structure is the impediment to the speed of innovation developments, its adoption and application, and it is asserted through this Preliminary Research report that this is tacitly understood.
Professor Dosi (1988) cites the dichotomy of Adam Smith in that organizations are comprised of those that “system learning effects on economic efficiency by way of the division of labor,” and “the degrading brutality which repetitive and mindless tasks could imply for some groups of workers”. These support the “how to do things” (the JOC) and “how to improve them” (the producer firm).
This dichotomy reflects the challenge of improving the processes and products through trial and error, with heavy emphasis on the error. The ability to accurately predict the success or failure of a new idea contains inherent high risks and hence high rewards. This is one of the constraining factors in implementing innovative thinking, in that no one wants to be proven wrong. Whereas, even if the idea fails the ability to test the theory, the failure may ultimately lead to and may be the key to discovery. Professor Dosi states;
Organizational routines and higher level procedures to alter them in response to environmental changes and / or to failures in performance embody a continuous tension between efforts to improve the capabilities of doing existing things, monitor existing contracts, allocate given resources, on the one hand, and the development of capabilities for doing new things or old things in new ways. This tension is complicated by the intrinsically uncertain nature of innovative activities, notwithstanding their increasing institutionalization within business firms. p. 1133For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
Posted by Paul Cox at 12:29 AM 0 comments
Labels: Dosi, Innovation, Research, Review