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Working with your competitors: Where Canadian energy companies succeed and fail at open innovation

New study from Haskayne School of Business examines 20 years of 'open innovation' in energy industry
April 19, 2017
UToday

A new study co-authored by three Haskayne School of Business researchers examines the 20-year history of open innovation in the Western Canadian oil and gas industry to reveal how their co-operation has affected the industry’s technological breakthroughs.

Open innovation is the idea of collaboration among industry competitors to further research and development on issues that impact all. In the Canadian energy industry, this occurs through industry-based non-profit innovation intermediaries or strategic bridging organizations that provide a cost-effective approach to outsourcing of corporate R&D, particularly in unconventional oil.

“Most people do not think of the oil and gas industry as being high-tech. It actually is,” says Harrie Vredenburg, the Suncor Chair in Strategy and Sustainability and academic director of the Global Energy Executive MBA, who co-authored the study with Amir Radnejad and Jaana Woyceshyn.  

“When you throw out the term ‘open innovation,’ most people think of cool ‘high-tech’ industries like biotech and information technology. But the oil and gas industry has, in fact, been collaborating on technology through open innovation for more than 20 years. And the challenges facing the oilsands industry today, notably cost efficiency and carbon emissions, may well make their biggest advances through this model of innovation.”

Researchers dug deep into early days of open innovation in oil and gas and oilsands

The researchers conducted a detailed investigation through extensive interviews and documentary records of Canadian oil industry experiments with open innovation from the earliest oilsands pioneering initiatives of the Alberta Oil Sands Technology Research Authority (AOSTRA) and the various open innovation organizations it spawned over the decades, as well as the open innovation initiatives in conventional oil and gas of the Petroleum Technology Alliance of Canada (PTAC) over its lifespan. Their article “Meta-organizing for open innovation under environmental and social pressures in the oil industry” has been published in a leading international innovation journal, Technovation: The International Journal of Technological Innovation, Entrepreneurship and Technological Management.

Through this research, and earlier findings from the project published in 2015 in the International Journal of Entrepreneurship and Innovation Management, the authors say industry finds it easier to employ open innovation methods to address strictly non-competitive environmental issues, such as managing tailings ponds. They are also more likely to employ open innovation in what is referred to as pre-competitive early-stage technologies than in competitive production technologies.

Several factors inhibit successful open innovation

Companies hesitate to fully share information freely lest they inadvertently disclose something and lose a competitive edge.  

“Culture also matters. Some companies have a more collaborative information-sharing culture while in other firms a strong Not-Invented-Here syndrome is prevalent. The former, obviously, are more suited to the open innovation model than the latter,” says Vredenburg.

Vredenburg says additional factors that inhibit open innovation success include changes in corporate leadership, innovation financing models, legal constraints, abilities of companies to absorb new technologies and the additional time required for open innovation versus single firm innovation. Many smaller companies just do not have the resources to engage in collaboration.

In the 1990s, innovation intermediaries were set up as cost-effective ways for companies to do R&D as they were shedding their own R&D departments due to low commodity prices. In more recent years, the motivation for innovation intermediaries has been to work together to address the environmental challenges faced by the entire industry.

Decades of collaboration puts oil industry in positive position

The newest innovation intermediary organizations, Vredenburg says, have mobilized significant resources and senior executives to collaborate, and these organizations have a high public profile. These characteristics serve to keep inter-firm collaboration going even when the going gets rough. As these neutral intermediary organizations actively invite and involve government agencies and environmental groups, this serves to transform the public discourse from an antagonistic environment versus a business one, to one seeking constructive societal outcomes. These organizations provide a forum for public workshops and meetings to air a broad range of societal perspectives. They have worked out intellectual property sharing protocols that efficiently allow firms to work together without overstepping competition regulatory legal bounds.

This decades-long oil industry experience, with what economists and organizational scholars call meta-organizing, has led to the industry possibly being well-positioned to respond as an industry to the environmental pressures it increasingly faces in the early decades of the 21st century.

Some of the research for this study formed part of Radnejad’s PhD dissertation at Haskayne under Vredenburg’s supervision. He is now assistant professor of management at Susquehanna University in Pennsylvania. Woyceshyn is director of PhD and thesis master’s programs at Haskayne. Vredenburg was one of the early pioneers in studying inter-organizational collaboration through strategic bridging organizations and innovation intermediaries, dating back to his first journal paper on the topic in 1991.

Primary extraction plants separate raw bitumen from the sand in giant separation cells.
Photo courtesy Suncor Energy Inc.
University of Calgary Haskayne School of Business researchers Jaana Woyceshyn, left, Amir Radnejad and Harrie Vredenburg co-authored a study on open innovation in the Western Canadian oil and gas industry.

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