Productivity drain or productivity gain? The effect of new technology adoption in the oilfield market

Abstract

This article aims to investigate the changing effects of new technology adoption on productivity convergence among oilfield service companies in the context of the shale technical revolution. A club convergence test is utilized to evaluate the competitiveness of each firm with and without new technologies, followed by a productivity catch-up model to identify the effect of new technology utilization over time. Using an unbalanced panel data of 114 major oilfield service companies worldwide from 1997 to 2014, the empirical results show that all firms with shale technologies are converging to the frontier. Increased utilization of shale technologies caused productivity drains when they were first invented, but then led to productivity gains when the technology became more sophisticated. Furthermore, productivity convergence was witnessed during the sample period.