Strengthening Local Capabilities for Innovation in Developing and Developed Economies - Coursework Example

The oil and gas industry Contents The role of government as a stakeholder in strengthening local capabilities for innovation in both the developing and developed economies 3 Diamond Theory 3 Responses of universities to the emerging industrial needs in the development of local capabilities for innovation in the developing and developed economies. 4 Internationalization of Universities in Russia and China- 5 Management of their global competition by the ‘oil capitals’ 5 Oil Cartels 5 OLI Model 6 Responses for stakeholders and universities strengthening local capabilities for innovation in both the developing and developed economies 6 References 8 The role of government as a stakeholder in strengthening local capabilities for innovation in both the developing and developed economies The role of government as a stakeholder seeks to strengthen local capabilities for innovation in both the developing and developed economies in different parameter. This could be described by a comparative analysis between a China, a developing economy and Russia, a developed economy. Diamond Theory The management of the global completions by the oil capitals can be explained with the management theory and the international competitiveness of Countries also called the ‘Diamond Theory’. The Diamond theory was advanced by Porter in 1990 to explain the competitive advantages of nations (Woolsey and Korin, 2008). The main focus of the theory was to find why some countries are more successful in particular industries than others. Four classes of country attributes were identified by Porter, which were called the National Diamond. These attributes provide the conditions underlying for the determination of the nation competitive advantage of a nation. These are the company strategy, structure and rivalry, related and support industries, demand conditions and factor conditions. Government policy and chance are two other factors that don’t create lasting competitive advantages but support and complement the system of national competitiveness (Aberdeen City Council and Aberdeen shire Council, 2001). The role of government as a stakeholder seeks to strengthen local capabilities for innovation in China and Russia using the Diamond Theory- The success of government in the Oil and Gas industry in Russia and China can be explained by Diamond Theory. Four classes of country attributes providing the conditions underlying for the determination of the nation competitive advantage of a nation were identified by Porter, also called the National Diamond are: 1. The company strategy-The Chinese government took the decision to restructure the petroleum and petrochemical industry in 1998 using the upstream and downstream principles of integration. As a result Foundation of CNPC and Sinopec took place. The merger of CNOOC Limited with CNOOC, PetroChina Company Limited with CNPC, China Petroleum & Chemical Corporation to Sinopec, were successfully founded. A crucial role is played by the Oil and gas industry in the political and economic development of Russia. Russia’s energy sector accounts for approximately 66% of its exports. The GDP contribution of the oil and gas sector is 30% of its GDP and 50% of the revenue generated from Federal Budgets. (Feng, Lianyong and et al. 2013) 2. The structure and rivalry- On the basis of launch of four exploration fields including, marine, overseas, eastern and western regions, oil reserves and output steadily increased in China. A high level annual increase of 100 million tons was seen from proven Chinese oil geological reserves. In the beginning of the 21st century, a major challenge was presented to the Russian Government due to the dramatic increase in the value of oil and gas resources of Russia, greater state intervention in the economy and increased budgetary revenues were followed by the increased prices of the resources. With the increased dependency on the energy sector in Russia as a result of the economic crisis of 2008-2009, the state-capitalist model was developed. (Sharples, 2012) 3. The related and support industries- Technical countermeasures were taken to overcome the existing problems of inadaptable existing technology in China. The Secondary oil production technology was improved. It leads to the development and perfection of the industrial application of tertiary recovery and promotion of the supporting technology in efficient and economical way. The most powerful energy sectors in Russia are controlled by the state. It helps the Russian government in balancing the interests of various social, political, and economic, and social factors, along with its own right. (Ernst & Young, n.d.). 4. The demand conditions and factor conditions- The acceleration of integration process of exploration and development, controlling effects to reduce production costs, improved yield and production, development of, measures to increase production, and increased investment in technology are some of the major aspects of government’s interest in oil and gas industry in China. The developments of a modernization program to develop non-energy sectors of the Russian economy and reduced its dependence on oil and gas exports (Hatakenaka and et. Al. 2006). Responses of universities to the emerging industrial needs in the development of local capabilities for innovation in the developing and developed economies. The general concern of Russia as a developed economy in higher education is regarding the direction of teaching towards specific social and teaching objectives. The Russian universities are asked to make an active contribution in the developments of the region where they are located. The regional availability of skills and knowledge is important in the environment of globalization and regionalization. The higher educational institutions of the region may become a power house and key asset for economic development. Cultural and social developments of the place where the universities are located always have a contribution from the universities. Responsive higher education system has to meet needs of a diverse client population, such as, Changing skills demand flexible structures for lifelong learning, and greater links between teaching and research, locally based education and more involvement with the research’s end users. Roughly every University expends additional funds on the protection of patents that are generally gained for innovation and for the intellectual property administration than they obtain from the activity of sale or licensing of equity relatively than “Fame”, by way of just a small number of exceptions, numerous Universities have mostly involved disapproval from governments and companies for a characteristically a smaller amount of stellar testimony of commercialization (University of Alberta, n.d.). Internationalization of Universities in Russia and China- The education industry in Russia is highly developed in the mode of teaching, research and development, and large resources compared to the Chinese universities. Though the main focus is on the native language in both the countries, but foreign language institutes and universities are far higher in Russia than that in China. The cultural differences in China are a major concern in foreign education. Comparatively the culture of Russia is not a problem for foreign students. The education has been the focus of the government in China since 1990 due to economic reforms. The Universities of Russia are equipped with more efficient and qualified faculties’ in comparison to China. The governmental regulations for entering in Russian education systems are highly strict. The procedure for setting up of cross-border educational programs is extensive and time consuming. It becomes the major constraint in entering the Russian education system whereas the cultural differences and legislative regulation in China are the major constraints for foreign universities to enter the country. The suitable mode of entering Russian higher education is: (1) Equity based “Joint Venture” combined with Cross-Border Mobility Provider “Branch Campus, (2) Equity/Non-Equity based “Strategic Alliance” combined with Cross-Border Mobility Programs “Twinning”, “Double/Joint Degree”, “Validation”, and (3) Non-Equity based “Franchising” combined with Cross-Border Mobility Program “Franchising. Whereas, the following modes on entry can be chosen for entering the Chinese higher education: (1) Franchising , (2) FDI (Foreign Direct Investment) through Joint Ventures, WFOE , RO (Representative Office) or Off-Shore Company. Management of their global competition by the ‘oil capitals’ Oil Cartels The nations, parties or fractions which unite into a group in a common cause are called a cartel. In order to regulate production, and marketing of goods by its members, some independent business originations form a combination called cartel. The diamond and steel industries are some examples. However, the cartel called Organization of the Petroleum Exporting Countries more commonly referred to as OPEC is one of the most powerful modern cartels. The large oil companies also known as the Seven Sisters possessed the technology and skills for exploration and production lacking in other countries before the rise of OPEC. Reduction of influence of the oil multinationals was a major objective of OPEC. The oil prices are not set by OPEC, but because the about 40% of the worlds oil supply is produced by the OPEC countries and about 55% of the total export in oil is contributed by them, their decisions play an important role in prices. To agree on the quantity and price of the oil their countries export is the main purpose of OPEC (Business Reference Services, 2013) OLI Model The OLI model also known as Dunning’ Eclectic Model is an expansion over internationalization theory. The OLI in the OLI model stands for the owner, location and internationalization. The management of global competition by oil capitals such as Russia, Saudi Arabia, etc can be explained with the help of this theory. In the Oil and gas industry there are two types of outsourcing. These include the low level outsourcing of tasks which are within the company’s reach. The greater economic profits are generated by firms having the ownership advantages in investments. The same technology could be used for the production in the country to avoid the foreign business cost. The local advantages make generation of greater profits attainable through home production. For example, the extraction of oil in Saudi Arabia is less expensive than in Alaska due to the location advantages. The cost of unskilled labor is a major part of the total costing of the product. The unskilled labor intensive projects are cheaper in China but capital intensive processes are imported by China. 12% of the world’s oil is produced by Russia. Internationalization is a major focus in OLI model. In order to determine the total control of assets or the usefulness of foreign direct investments, internationalization must be done. The internationalization of the oil and gas industry by different countries has lead to the formulation of OPEC. (Davis, 2006) Responses for stakeholders and universities strengthening local capabilities for innovation in both the developing and developed economies The higher education institutions are responding to the changing regional needs in terms of community service, research and Teaching. Responding to regional needs for higher education institutions has many barriers. It is influenced by the political-economic structures of both regions and nation-states and history of individual institutions. There are a number of drivers and barriers exist to greater regional engagement because of these characteristics in the two main areas of activity within higher education institutions, teaching and research, are undertaken. The barriers to greater regional engagement are quite significant. Some of the major barriers are: demands for courses non-congruent with the region’s development needs, nationality driven subject provisions, high startup costs of regional collaborative projects; and lack of regional seed corn funds, lack of links between the formulation of regional policy initiatives by senior management and implementation by teaching staff (World Conference on Higher Education. 1998). Greater localization and regionalization of teaching also have several barriers. That include a fear that enhanced skills increase rather than decrease regional labor mobility and anxiety about the `decline in standards and. The difficulty of matching the attributes of graduates and the skills needs of local employers, especially SMEs is a major barrier. All these barriers must be overcome by the Universities in response to the changes in nations. With the Ministry of Education or a quasi-independent funding body reporting to it lays the responsibility for funding higher education. Different other Ministries are concerned with the regional agenda for universities and colleges are also likely to touch on the concerns of a number of. Thus, the functional divisions are reproduced within the national government by higher education institutions (Besant, 2003). References 1. Feng, Lianyong and et al. 2013.The Chinese Oil Industry: History and Future. Available at https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&sqi=2&ved=0CF4QFjAE&url=http%3A%2F%2Fwww.springer.com%2Fcda%2Fcontent%2Fdocument%2Fcda_downloaddocument%2F9781441994097-c1.pdf%3FSGWID%3D0-0-45-1365008-p174102163&ei=wWfUsDPFsW3rgfth4DgAw&usg=AFQjCNFuDTdwDjLaszVGAkf04IQTMrt_GQ&bvm=bv.57155469,d.bmk\ [accessed on 4th December 2013] 2. Sharples, Jack. D. 2012. The Role of Oil and Gas in Discourses on Russias Development to 2020.Available at http://www.academia.edu/1534976/The_Role_of_Oil_and_Gas_in_Discourses_on_Russias_Development_to_2020 [accessed on 4th December 2013] 3. Business Reference Services. 2013. Industry Cartels & Organizations. Available at http://www.loc.gov/rr/business/BERA/issue5/cartels.html [accessed on 4th December 2013] 4. Woolsey, R. James and Korin, Anne. 2008. How to Break Both Oil’s Monopoly and OPEC’s Cartel . Available at http://www.iags.org/innovations_korinwoolsey08.pdf [accessed on 4th December 2013] 5. Aberdeen City Council and Aberdeenshire Council.OIL and GAS PROSPECTS. 2001. Available at http://www.aberdeenshire.gov.uk/statistics/economic/oil_gas_prospects_2001.pdf [accessed on 4th December 2013] 6. Hatakenaka, Sachi and et. Al. THE REGIONAL DYNAMICS OF INNOVATION: A comparative case study of oil and gas industry development in Stavanger and Aberdeen.2006 . Available at http://web.mit.edu/ipc/publications/pdf/06-008.pdf [accessed on 4th December 2013] 7. Ernst & Young, Capital project life cycle management for oil and gas. N.d. Available at http://www.ey.com/Publication/vwLUAssets/Capital_projects_life_cycle_managemant_oil_and_gas/$FILE/Capital_projects_life_cycle_managemant_Oil_and_Gas.pdf [accessed on 4th December 2013] 8. Chatterton, Paul and Goddard, John.The response of higher education institutions to regional needs.2000. Available at http://www.paulchatterton.com/wp-content/uploads/2009/05/chatterton-and-goddard-he-and-regfonal-needs.pdf [accessed on 4th December 2013] 9. World Conference on Higher Education.WORLD DECLARATION ON HIGHER EDUCATION FOR THE TWENTY-FIRST CENTURY: VISION AND ACTION. 1998. Available at http://www.unesco.org/education/educprog/wche/declaration_eng.htm [accessed on 4th December 2013] 10. Besant, John and et. Al. 2003. Developing capability through learning networks. Available at http://johnbessant.net/uploads/books/14.pdf[accessed on 4th December 2013] 11. University of Alberta, n.d. Role of Universities in Innovation : An Oil Sands Example. Available at http://www.ppforum.ca/sites/default/files/David%20Lynch%20-%20Panel%203.pdf[accessed on 8th December 2013] 12. Davis , Jerome D. 2006.The Changing World of Oil: An Analysis of Corporate Change and Adaptation. Available at http://books.google.co.in/books?id=bMnyOlROmnQC&pg=PA193&dq=OLI+model+in+oil+industry&hl=en&sa=X&ei=kKemUqedOIGPrQf5goCABA&ved=0CEYQ6AEwAA#v=onepage&q=OLI%20model%20in%20oil%20industry&f=false [accessed on 9th December 2013] Read More