The resource allocation process in oil and gas corporations

Abstract

The stock market continues to pressure all corporations to generate profitable growth in both the short and long term. Long-term success is dependent on a firm's capability to develop and implement strategy. The successful strategy combines resources and competencies from across the organization to fully exploit growth potential by allocating those resources to new business opportunities. Resource allocation is a challenging process, concerning management of scarce resources. Resources include money, equipment, raw goods, labour, and management time. The objective of this research is to describe the key components of the organizational context that define the resource allocation process in Canadian subsidiaries of large oil and gas corporations. More specifically, the thesis will focus on parameters such as subsidiary type, corporate context, procedural justice and coordination/control (transaction) costs, as indicators that provide a basis to distinguish among various types of resource allocation systems. Additionally, the study will provide details on the informal process of project substitution. Project substitution is the process of substituting projects in place of cancelled or delayed projects that were approved during the annual capital budget cycle. The resources that one division gets, others cannot. This balance is often the discord between funding induced projects and autonomous projects. The key findings in this study result from case studies of seven oil and gas subsidiaries. The case studies suggest specific interrelationships among subsidiary types, structural context, transaction costs and corporate context. Canadian subsidiaries from companies that have continued to operate and grow their subsidiaries in Canada tend to be strategic leaders associated with low transaction costs and high procedural justice.