Foreign operations and modes diversity: A study of Norwegian oil field services

Abstract

This study takes a critical look at both how firms configure their foreign operations in the global market place; and the rational for and impediments behind the dynamics of mode configurations. The data analysis draws mainly on dynamic foreign operation modes theories based on two controversial perspectives— economic perspective and internationalization theory. This is complemented with research on an activity based perspective, in the field of global value chains and factories. This research applied a mixed method by providing a quantitative overview of mode configurations in Norwegian Oil Field Service (OFS) industry, with further in-depth qualitative case analyses on OFS firms’ foreign operations. The findings of this research indicate that certain types of activities tend to favor specific mode configurations, where knowledge intensive activities drive the foreign operation mode diversity on both location and activity levels. Additionally, a lower degree of ownership is correlated with the diversity of modes, especially at locational level. Moreover, by considering the foreign operations as a three-dimensional construct (i.e. activity, location and corporate governance), managers may gain a more clear and structured picture of their foreign operations. It is also stressed that foreign operations must be viewed over a temporal dimension as it is subject to continuous circumstantial changes. In turn, having a full understanding of how to configure foreign operations across the three dimensions over time might entail a competitive advantage. While this paper only found a correlation between the locational dimensional construct and firm’s performance, further investigations on performance is highly warranted and called out for by the authors. Moreover, some important characteristics of OFS steered the firms to build strategic flexibility into their foreign operations. This might be linked with the highly increasing trend of contractual modes usage; while the firm’s operations remain diversified in their mode packages. Besides, flexibility in foreign operations might help managers mitigate issues, such as lock-in effects and mode inertia. In sum, this paper comprehensively investigates foreign operations and mode diversity of OFS firms. The study also tries to encourage further research in cleaning up the somewhat “messy” reality of foreign operation modes and their configurations.