Microeconomics of Competitiveness

May 2012

Olivia Leskinen | Paul Klouman Bekken | Haja Razafinjatovo | Manuel Garca

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Factoi Conuitions: Euucation ..................................................................................................................................... 9
Factoi Conuitions: Reseaich & Bevelopment .................................................................................................. 1u
Context foi Fiim Stiategy anu Rivaliy: Foieign Biiect Investment (FBI) ........................................... 12
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Relateu anu Suppoiting Inuustiies ....................................................................................................................... 21
Bemanu Conuitions ..................................................................................................................................................... 21
Context foi Fiim Stiategy anu Rivaliy ................................................................................................................ 22
Factoi Conuitions ......................................................................................................................................................... 24
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Bespite being a small, peiipheial anu costly maiket, Noiway has become one of the
most piospeious economies in the woilu. This stoiy of success can be explaineu by
abunuant natuial iesouices (with oil anu gas piouuction beginning in 1971), sounu anu
stable macioeconomic policies, stiong public institutions, iemaikably high piouuctivity
anu laboi utilization, equality acioss its homogeneous population, anu social stability.
Bowevei, Noiway must not become complacent. The economy is not sufficiently
uiveisifieu anu shoulu be moie open; the countiy has not fully evolveu fiom a natuial
iesouice-baseu to a knowleuge-baseu economy. With ueclining oil anu gas ieseives anu
piouuction, Noiway must act to maintain its levels of piospeiity.
The oil anu gas suppliei clustei, analyzeu in this papei, is a goou example of the way
foiwaiu. 0nlike othei oil-piouucing countiies, Noiway has been able to uevelop a suppliei
clustei that suppoits oil anu gas piouuction. The ciitical success factois weie existing
capabilities in the maiitime inuustiy, sophisticateu uemanu conuitions, anu balanceu policy
inteivention. Touay, the Noiwegian suppliei companies aie leauing playeis that aie
stiategically positioneu in many of the most uynamic oil piovinces of the woilu.
Bowevei, the clustei also faces some challenges foi the futuie. The euucation
system anu the laboi maiket geneiate insufficient qualifieu anu skilleu human capital. The
ueclining uomestic piouuction ieuuces the oppoitunities foi the companies to uevelop
cutting-euge technologies. Finally, an incieasing shaie of opeiations abioau gives moie
location options foi heauquaiteis anu exposes the companies to geopolitical iisks.
This papei uigs into the successful stoiies of Noiway's economy anu the oil anu gas
suppliei clustei but, most impoitantly, iuentifies key challenges anu pioviues
iecommenuations foi Noiway foi the post-oil eia.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 S
97 :2%521%; '( <'5;"6
Noiway is a pailiamentaiy uemociacy anu constitutional monaichy in Noithein
Euiope. Baving emeigeu fiom unions with Benmaik (1S97-1814) anu Sweuen (1814-
19uS), Noiway gaineu inuepenuence in 19uS. The countiy iejecteu E0 membeiship in
iefeienua in 1972 anu 1994, but is pait of the Euiopean Economic Aiea, which ensuies
wiue maiket access to the E0. Noiway was a founuing membei of the 0N, NAT0 anu WT0.
Political powei is centializeu, with limiteu authoiity uevolveu to 19 counties anu 4Su
municipalities.
The boiuei to the East with Sweuen, Finlanu anu Russia is 1,S92 miles long, anu the
16,uuu miles of coastline to the South, East anu Noith face the Noith Sea, the Noiwegian
Sea anu the Baients Sea. With its vast continental shelf
wheie the petioleum iesouices aie founu, its total
teiiitoiy, incluuing the teiiitoiial wateis, is 81u,814
squaie miles, an aiea equivalent to the 0S 18uS
Louisiana puichase of the whole of Louisiana,
Nissouii, Aikansas, Iowa, Noith Bakota, South Bakota,
Nebiaska, anu 0klahoma, anu most of Kansas,
Coloiauo, Wyoming, Nontana, anu Ninnesota (Encyclopeuia Biitannica, 2u12).
88% of the five million inhabitants aie ethnic Noiwegians, anu they aie
pieuominantly Piotestant Chiistians. The population uensity is only 4u people pei squaie
mile (Statistics Noiway, 2u12). Social equality is high, with a uini Coefficient of u.2S, below
the 0ECB mean of u.S1, mainly uue to centializeu wage negotiations anu in kinu tiansfeis
(euucation, healthcaie, social seivices) fiom a geneious welfaie state (0ECB, 2u12).
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 4
87 <'5;"6>, %/'*'41/ ?%5('54"*/%
Fuelleu in paiticulai by ievenues fiom petioleum piouuction, which staiteu in the
beginning of the 197us, Noiway's uBP pei capita incieaseu fivefolu in nominal teims fiom
$9,SS1 in 198u anu to $S6,648 in 2u1u, which is the seconu highest in 0ECB (0ECB, 2u12).
As seen in Figuie 2, even excluuing petioleum, which constitutes 2S% of the economy,
Noiway's uBP pei capita woulu be just behinu the 0niteu States anu Switzeilanu. The total
2u1u uBP of $277 billion1.7S% of the Ameiican economymaue Noiway the woilu's
2S
iu
laigest economy (Woilu
Bank, 2u11). Nanufactuiing only
accounts foi 9% of the economy,
a smallei shaie than in peei
countiies (Statistics Noiway,
2u12). Living costs aie high;
uomestic puichasing powei is only 67% of the 0niteu States.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 S
In 2u1u, laboi utilization was 7S.S% in the 1S-64 age biacket, compaieu to an E0
aveiage of 64.2%. The gap between Noiway anu the E0 is highei foi women (7S.S% vs.
S8.2%) (Euiostat, 2u11). Bowevei, as seen in Figuie S, the aveiage annual houis woikeu is
1,414, significantly lowei than the 0ECB aveiage of 1,749 (0ECB, 2u1u). 0nemployment
has been consistently low foi yeais anu is now S.2% (Statistics Noiway, 2u12).
AB6 B", <'5;"6 C'*% ,' ;%$$ '2%5 +B% $",+ +;%*+6 6%"5,D
A key question is why Noiway has expeiienceu sustaineu giowth above the 0ECB-
aveiage ovei the last twenty yeais even in the non-petioleum pait of the economy.
Noiway tops the piouuctivity ianking in the 0ECB (0ECB, 2uu8). Between 197S anu
2uu6, Noiway was the only 0ECB countiy with highei uBP giowth pei capita than the
0niteu States. In 2u11, uBP pei houi woikeu was 28% above the 0S level; uiscounting the
petioleum sectoi, Noiway woulu be on pai with the
piouuctivity of the 0niteu States, as shown in Figuie 4. This
might be uiiven by fiims continuously intiouucing new
technology uue to the stiong incentives to upgiaue
piouuctivity pei woikei, since laboi is expensive
(Noiwegian Ninistiy of Finance, 2uu9).
In auuition, Noiway's giowth can be attiibuteu to the teitiaiy sectoi expanuing
moie iapiuly than the piimaiy anu seconuaiy sectois. Since 2uuu, euucation, ieal estate,
financial seivices, oil anu gas seivices anu constiuction have enjoyeu aveiage annual
giowth iates between S.S% anu S.S%, wheieas manufactuiing, fishing anu agiicultuie only
giew between 1.S% anu S.S% pei yeai (Statistics Noiway, 2u12). This shift towaius the
teitiaiy sectoi may have shielueu Noiway fiom low-cost manufactuiing competition, in
paiticulai fiom China. Fuitheimoie, the stiuctuie of the Noiwegian economy has helpeu
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 6
Noiway shaiply impiove its teims of tiaue. Between 1991 anu 2u11, piices of Noiwegian
expoit goous incieaseu 8S% moie than piices on Noiwegian impoit goous. Excluuing
petioleum, this figuie woulu be 2u% (Statistics Noiway, 2u12).
=7 )'4?%+1+12%*%,, F*"$6,1, '( <'5;"6
-*C';4%*+,
Noiway has iich enuowments of fish, timbei anu mineials, in auuition to petioleum.
Bomestic electiicity supply is almost 1uu% hyuioelectiic powei. Wintei conuitions aie
haish, anu the teiiain is iuggeu anu mountainous. Noiway's coastline iaiely fieezes. The
countiy has easy access to laige anu iich maikets in Euiope: ueimany, the 0niteu Kinguom
anu the othei Scanuinavian countiies.
The Noiwegian oil anu gas ieseives aie the 19
th
laigest in the woilu. Noiway has
1.1% of gas ieseives globally (BP, 2u11) anu pioviues aiounu one thiiu of the E0's gas
impoits (Euiostat, 2u11). The ieseive to piouuction iatio foi gas is 19.2 yeais anu foi oil
8.S yeais (BP, 2u11), though Noiwegian authoiities expect an expansion of known ieseives
anu continueu oil piouuction well beyonu 2u2u (Noiwegian Petioleum Biiectoiate, 2u12).
)'4?%+1+12%*%,, H5'(1$% "*C +B% <"+1'*"$ I1"4'*C
Noiway ianks 9
th
out of 1S6 countiies on the global competitiveness inuex. It is 7
th

on the macioeconomic scoiecaiu anu 22
nu
on the micioeconomic ianking (ISC, 2u12).
["/5'%/'*'41/ V0*C"4%*+"$,K Noiway
has sounu fiscal anu monetaiy policies, low
inflation,
1
anu a stable cuiiency (the
Noiwegian Kione), as can be seen in Figuie

1
Inflation was u.8% fiom Naich 2u11 to Naich 2u12 (Statistics Noiway, 2u12).
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 7
S. The countiy invests its petioleum ievenues abioau in the "uoveinment Pension Funu"
anu has committeu to only haivesting 4% of the funu annually to plug a stiuctuial ueficit in
the state buuget. This policy has helpeu Noiway avoiu the "Butch uisease," which iefeis to
incieaseu cost anu loss of competitiveness in an economy iesulting fiom petioleum
ievenue inflows. Fuitheimoie, national uebt is only 26% of uBP; the aveiage goveinment
suiplus fiom 2uu6 to 2u1u was 1S%. Bespite high tax iates, the impact of taxation on the
incentives to woik anu invest is less negative than in many auvanceu economies, since the
auministiation of the tax system is less buiuensome (BBS ISC, 2u12).
[1/5'%/'*'41/ V0*C"4%*+"$,K The national business enviionment has flaws that aie
suipiising foi such a wealthy countiy. The active iole of the state in the economy incluues a
high iegulatoiy buiuen foi businesses. The small uomestic maiket anu tiaue baiiieis
pievent uynamic tiaue flows, anu the uomestic value chain is less bioau-baseu than in peei
countiies. Financial maikets aie sounu anu well iegulateu, anu paiticulaily sophisticateu in
the oil anu gas sectoi. Noiway's ielative piouuctivity has fallen since 2uu6, when it was
4u% above the 0S level. Immigiation fiom Eastein Euiope, pieuominantly cheap laboi, has
incieaseu in this time peiiou, fiom close to u in 2uu2, to aiounu S,uuu in 2uu4 anu ciica
1S,uuu annually in 2uu8-2u1u (Statistics Noiway, 2u11).
3'/1"$ Q*(5",+50/+05% "*C H'$1+1/"$ Q*,+1+0+1'*,K Noiway is numbei 1 on the 0N's human
uevelopment inuex, anu comes 6
th
on the 0N's composite inuex of genuei equality. Theie is
univeisal access to viitually fiee public health caie anu euucation. The juuicial system is
inuepenuent anu stiong. The piess is fiee, but less uiveise than in peei countiies.
Pailiament anu goveinment aie seen as effective.
V"/+'5 )'*C1+1'*,K Roaus anu iailioaus aie expensive to builu, since the population is
geogiaphically uispeiseu anu the teiiain uemanuing. Poit infiastiuctuie is infeiioi to peei
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 8
countiies. Bowevei, Noiway has a well-uevelopeu Inteinet bioaubanu netwoik. The
pioceuuies to stait new businesses aie ielatively buiuensome, but Noiway ianks close to
the top in the global competitiveness inuex with iegaius to access to cieuit, ventuie capital
funus anu financing thiough local equity maiket.

)'*+%.+ ('5 V154 L12"$56 "*C 3+5"+%J6K Noiway enjoys excellent laboi-employei
ielations. The legal fiamewoik to settle uisputes anu enfoice contiacts is ieliable, anu theie
is little coiiuption. Bowevei, tianspaiency in political uecision-making is below peei
countiies. FBI is at a low level, anu theie aie weak incentives foi employees to upgiaue
competence anu piouuctivity. As will be exploieu in gieatei uetail, state owneiship is a
significant featuie of the economy.
I%4"*C )'*C1+1'*,K The haish wintei conuitions anu mountainous teiiain have foiceu
innovation to oveicome uifficulties poseu by natuie, foi example in the oil anu gas inuustiy
oi in piomoting the use of ICT.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 9
L%$"+%C "*C 30??'5+1*J Q*C0,+51%, "*C 3+"+% '( )$0,+%5 I%2%$'?4%*+K The economy is
less uiveisifieu than most uevelopeu economies, even those with compaiable size. Figuie 7
shows this low uiveisification giaphically, along with stagnating expoit giowth. Noieovei,
S natuial iesouice-baseu clusteis aie among the S laigest clusteis in teims of expoits.

A key tenet of the Noiwegian goveinment's inuustiial policy is to builu on existing
stiengths in ueveloping a moie knowleuge-baseu economy, though specific clustei policies
uo not appeai to be shaiply piioiitizeu. Noiway has some successful clustei piogiams
(ARENA, NCE), leu by 400%5*.&%0 1%/2*3, the goveinment agency foi inuustiial
uevelopment (Nenon, 2u11; Econ Poyii, 2u11), anu has uevelopeu a limiteu numbei of
clusteis that aie competitive woiluwiue.
V"/+'5 )'*C1+1'*,K -C0/"+1'*
Noiway's iesults in euucation uo not match the level of expenuituie, which is the S
th
highest in Euiope in teims of % of uBP (Euiostat, 2uu8). As shown in Figuie 8, the scoies
in science, mathematics anu ieauing aie only aveiage in the 0ECB, at 19
th
, 16
th
anu 1u
th

!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 1u
place iespectively (0ECB-PISA, 2uu9). These uata iaise conceins about the ability of the
countiy to innovate anu inciease the technological sophistication of its economy.

The teitiaiy euucation system miiiois this tenuency: although the eniollment in
teitiaiy euucation is among the highest in the uevelopeu woiluSS% (0ECB, 2uu9)
Noiway lacks woilu-class univeisities. Inueeu, theie is only one Noiwegian institution
among the woilu's top 2uu univeisities, compaieu to 6 in Switzeilanu, 4 in Sweuen anu 4 in
Belgium. Noieovei, no Noiwegian institutions aie incluueu in the ianking of top Schools of
Engineeiing (Shanghai }iao Tong 0niveisity Ranking, 2u11).
V"/+'5 )'*C1+1'*,K L%,%"5/B M I%2%$'?4%*+
The 0ECB has exploieu what it iefeis to as "."# 1%/2#)&*0 6-77'#": uespite weak
innovation inputs anu even weakei outputs, income pei capita in Noiway is veiy high.
Noiway's expenuituies on R&B aie much lowei than peeis (1.61% of uBP vs. 1.92% in the
E0), with a lowei contiibution fiom the piivate sectoi (SS% vs. 6S%) (Euiostat, 2uu8).
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 11
Noiway has incieaseu its patenting output in the last uecaue, but is significantly less
innovative than leauing 0ECB countiies (0S Patent anu Tiauemaik 0ffice, 2u1u), in
paiticulai in the high-tech aiea. The cause of this appaient contiauiction between the
peifoimance of the innovation system anu the economy has been intensely uiscusseu. Foi
the time being, the most accepteu explanation is the stiuctuie of the Noiwegian economy.
Accoiuing to the 0ECB, if Noiway hau the same inuustiy stiuctuie as the aveiage
0ECB countiy, it woulu have the 4
th
highest R&B intensity in the 0ECB iathei than the 1u
th

(0ECB, 2uu8). Noiway uoes not have laige fiims in sectois with high R&B intensities since
a laige pait of the economy is baseu on natuial iesouices; oil anu gas accounts foi only 6%
of all piivate sectoi R&B, uespite accounting foi 2S% of uBP. Bowevei, even accepting
these stiuctuial constiaints, theie is ioom foi impiovement.

The figuie above shows that the 0niteu States piouuces almost S times moie
patents than Noiway pei $ investeu in R&B (0S Patent anu Tiauemaik 0ffice, 0ECB,
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 12
Euiostat, 2u1u). Bespite public funus accounting foi 47% of R&B spenuing, most
innovation occuis in the piivate sectoi, suggesting that the public R&B base (Colleges,
Reseaich Institutes, 0niveisities) lags behinu the piivate sectoi in teims of efficiency anu
effectiveness.
)'*+%.+ ('5 V154 3+5"+%J6 "*C L12"$56K V'5%1J* I15%/+ Q*2%,+4%*+ UVIQW
The benefits of FBI woulu be paiticulaily valuable foi a small countiy like Noiway
uue to the peifoimance of its euucation anu innovation systems. Bowevei, inflows anu
inwaiu stocks of FBI in the last uecaue aie below those of the most uynamic economies
(incluuing South Afiica, Austialia oi Biazil) anu, what is moie woiiying, fai fiom neighboi
countiies like Sweuen, Finlanu, Benmaik, 0K oi the Netheilanus (0NCTAB, 2u1u).
Noiway's position in outwaiu FBI
2
is ielatively bettei, but still woise than peeis.

2
The investments unueitaken by !"# 8%5#/09#0. 6#0+&%0 :-0; < 8'%=*' aie not consiueieu as FBI because they nevei
take moie than a 1u% equity stake in any given company.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 1S
)'4?"*6 :?%5"+1'*, "*C 3+5"+%J6K !B% L'$% '( +B% 3+"+% 1* +B% -/'*'46
The State has histoiically playeu a ciitical iole in the economy of Noiway. Excluuing
petioleum, public expenuituie is the highest in the 0ECB as a % of uBP (0ECB, 2u12).
Theie is extensive state owneiship in enteipiises (S0Es). The iationale foi maintaining
S0Es can be gioupeu in 4 main categoiies: i) Inuustiial uevelopment anu sectoiial policies,
ii) Contiol of stiategic natuial iesouices, iii) Noiwegian owneiship, heau office location anu
pieseivation of stiategic national competence anu iv) Financial ietuins.
Noiway has unueitaken impoitant iefoims in its owneiship policy ovei the last 1S
yeais, sepaiating the commeicial fiom the iegulatoiy oi public functions anu impioving
management anu goveinance. Some companies have been totally oi paitially piivatizeu.
Bowevei, as can be seen in the Figuie 11, Noiway is still one of the 0ECB countiies
with the highest involvement of the State in the economy, only below Polanu anu Tuikey.
Inueeu, the uoveinment has an owneiship stake in 77 companies, with S2 manageu
uiiectly by the uoveinment ministiies. The size of S0Es vaiies fiom laige multinationals
(the State has significant owneiship stakes in 7 of the 1u laigest publicly tiaueu companies
heauquaiteieu in Noiway) to SNEs.

!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 14
Noiway has given the Ninistiy of Tiaue anu Inuustiy the main iesponsibility foi
auministeiing state owneiship; this paitly ieplicates the centializeu mouel iecommenueu
by the 0ECB, which is useu by Singapoie, Benmaik anu Sweuen. Bowevei, theie aie
impoitant exceptions foi companies such as Statoil (Ninistiy of Petioleum anu Eneigy) anu
Kommunalbanken (Ninistiy of Local uoveinment anu Regional Bevelopment) (Ninistiy of
Tiaue anu Inuustiy, 2u11).
Bespite the effoits of Pailiament anu the uoveinment, some inheient iisks iemain:
piincipal-agent anu fiee-iiuing pioblems, lowei accountability, the moial hazaiu ueiiveu
fiom a softei buuget constiaint oi less oppoitunities foi innovation anu agility in the S0E.
The 0ECB has unueiscoieu that theie is also a iisk foi competition: ".% >/%9%.# * 9%/#
;&/#,. *0; *,.&5# +.*.# %20#/+"&>" (as the Pailiament usually uemanus) coulu imply a "9%5#
&0 ."# ;&/#,.&%0 %? *0 &0.#/5#0.&%0&+. &0;-+./&*' >%'&,3 ."*. 2%-'; -0;#/9&0# ."# /#?%/9+
.*@#0 ."# >*+. .2% ;#,*;#+ *0; #A*,#/=*.# .#0+&%0+ /#'*.#; .% )%%; )%5#/0*0,# *0;
,%9>#.&.&5# 0#-./*'&.3" (0ECB, 2uuS). 0n the othei hanu, the policy of pieseiving
heauquaiteis of nationally stiategic companies in Noiway has succeeueu.
@7 !B% :1$ M N", 30??$1%5 )$0,+%5
0nlike most oil anu gas piouucing nations, Noiway has uevelopeu a significant
uomestic clustei of supplieis to oil anu gas opeiatois. The suppliei clustei employs
114,uuu people in Noiway anu achieveu sales of $S2 billion in 2u1u, $2u billion of which
weie sales to customeis outsiue of Noiway (Sasson, 2u11; Skjellevik, 2u11). The clustei
succeeueu, because the uoveinment put in place effective policies that enhanceu pie-
existing competences in ielateu inuustiies (shipping, shipbuiluing, anu mining), anu the
fiims weie foiceu to innovate unuei haish uemanu conuitions. The clustei is stiategically
positioneu as a technology-uiiven innovatoi.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 1S
O1,+'56 '( :1$ "*C N", 1* <'5;"6
The uiscoveiy of gas off the coast of the Netheilanus in 19S9 piompteu Phillips
Petioleum to apply foi peimission to exploie off the coast of Noiway. The laigest fielu,
Ekofisk, was uiscoveieu in the Noith Sea in 1969, anu piouuction began in 1971. The oil
anu gas sectoi has uiamatically tiansfoimeu the economy in a meie 4u yeais, as can be
seen in Figuie 12.

0il piouuction peakeu in Noiway in 2uu1 at S.4 million baiiels pei uay, while gas
piouuction continues to inciease, giowing on aveiage by 4.6% fiom 2uu6-2u1u. In 2u1u,
Noiway piouuceu 2.1 million baiiels pei uay of oil anu 1u6.4 billion cubic meteis of
natuial gas (BP, 2u11). This maue Noiway the 1S
th
laigest piouucei of oil anu the 6
th

laigest piouucei of natuial gas.
The uominant inuustiy playei is Statoil, heauquaiteieu in Stavangei, Noiway. Statoil
was founueu in 1972 as a 1uu% state-owneu oil company, was paitially piivatizeu in 2uu1,
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 16
anu meigeu with Noisk Byuio in 2uu7. Touay the Noiwegian goveinment owns 67% of
Statoil, anu the iemaining shaies aie tiaueu on the New Yoik anu 0slo stock exchanges. It
is the laigest company in the Noiuic iegion with $116 billion in 2u11 ievenues anu $8S
billion in Apiil 2u12 maiket capitalization (Statoil, 2u12). Statoil is inteinationalizing; 2S%
of Statoil's pioveu ieseives aie outsiue of Noiway, anu an equal peicentage of ievenues
came fiom inteinational maikets in 2u11.
:1$ "*C N", P"$0% )B"1* 1* <'5;"6
As seen in Figuie 1S, the oil anu gas value chain is uiviueu into S phases: 0pstieam
(seaiching foi anu getting oil anu gas out of the giounu), Niustieam (gas piocessing anu
tianspoitation), anu Bownstieam (iefining oil anu uistiibuting, selling, anu maiketing oil
anu natuial gas piouucts). Theie aie companies in all paits of the oil anu gas value chain in
Noiway, with paiticulai intensity in 0pstieam activities uue to the small maiket size foi
Bownstieam piouucts. The companies iange in size fiom the behemoth Statoil to staitups.
Figuie 14 is a clustei map that uepicts the inteiaction between the actois in the oil anu gas
clustei in Noiway.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 17
The 0pstieam oil anu gas value chain can fuithei be uiviueu into opeiatois anu theii
supplieis. 0peiatois aie companies that have piouuction licenses oi have opeiating iights
foi oil anu gas fielus. Statoil is the main opeiatoi in Noiway, accounting foi 7u% of
piouuction (Sasson, 2u11). The Noiwegian subsiuiaiies of inteinational opeiatois
ExxonNobil, Shell, Naiathon, ConocoPhilips, anu Eni also make the list of the top ten oil
anu gas fiims in Noiway by ievenue (Capital IQ, 2u12). Expoits of the iaw mateiials of oil
anu gas by opeiatois totaleu $8S billion in 2uu9, 46% of total Noiwegian expoits (Sasson,
2u11).
0peiatois coulu not have piouuceu this volume of expoits without suppoit fiom
supplieis. Supplieis to these opeiatois accounteu foi 8% of 2uu9 Noiwegian expoits
(Sasson, 2u11). Theie aie five sub-clusteis of oil anu gas supplieis: 1) uiill anu well, 2)
opeiations suppoit, S) topsiue, 4) subsea, anu S) geology anu seismics. Table 1 uesciibes
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 18
the suppliei piouucts, impoitant Noiwegian companies, numbei of companies, anu
numbei of employees by sub clustei.

N'2%5*4%*+ H'$1/6 I%/1,1'*, +B"+ ,B"?%C +B% 30??$1%5 Q*C0,+56 1* <'5;"6
Seveial impoitant policy uecisions in the 197us alloweu the Noiwegian supplieis to
uevelop competences. The goveinment implementeu piotectionist piocuiement policies. In
S4 of the Noiwegian Petioleum Coue, opeiatois, such as Phillips Petioleum, weie legally
iequiieu to infoim the Ninistiy of Petioleum anu Eneigy about suppliei bius. The Ninistiy
coulu then uemanu that specific Noiwegian fiims be incluueu on the biuuei list. Foieign
fiims coulu not be excluueu fiom the list, but the Ninistiy hau the authoiity to change who
was awaiueu the contiact. Infoimally views weie exchangeu with the Ninistiy on which
company shoulu be awaiueu the contiact.
As pait of the licensing piocess, foieign opeiatois hau to come up with plans to
uevelop the competences of the local supplieis. The Noiwegian goveinment subsiuizeu the
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 19
local uevelopment costs with tax ueuuctions. This is anothei uistinguishing featuie of the
Noiwegian policy mouel (Beum, 2uu8).
Theie weie location-baseu uiiectives to keep R&B activities in Noiway. In the 4
th

licensing iounu in 1978-1979, authoiities intiouuceu a iequiiement that at least Su% of
R&B necessaiy to uevelop a fielu hau to take place in Noiwegian institutions. Latei this
Su% iequiiement was ieplaceu with "goouwill agieements" unuei which foieign opeiatois
hau to make an effoit to conuuct as much oil anu gas R&B in Noiway as possible.
Bowevei, these piotectionist policies only taigeteu inuustiies wheie Noiway was
alieauy woilu class (e.g. shipping but not steel) (Beum, 2uu8). These policies weie
iemoveu as Noiwegian fiims uevelopeu competences anu weie phaseu out in 1994, when
Noiway enteieu into a fiee tiaue agieement with the E0, which piohibiteu these piactices.
:1$ "*C N", 30??$1%5 )$0,+%5 H%5('54"*/%
The oil anu gas supplieis in Noiway have enjoyeu phenomenal giowth ovei the past
few yeais. Employment in the suppliei inuustiy has giown fiom S9,uuu in 199u to 114,uuu
in 2uu9, while employment by opeiatois
(customeis foi the supplieis) has stayeu
ielatively flat ovei the same peiiou at
aiounu 2u,uuu (Sasson, 2u11). Nost of
the employment is concentiateu in the
South anu West, paiticulaily in Rogalanu
County (see Figuie 1S). Suppliei sales
totaleu $S2 billion in 2u1u, having giown
moie than S1% fiom 2uu6. The
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 2u
employment giowth iate (Su%) since 2uu6 has been significantly slowei than ievenue
giowth, uue to Noiwegian laboi costs incieasing by S1% ovei the same S yeai peiiou
(Skjellevik, 2u11).
Supplieis have been able to giow theii ievenues, because they have been able to
inteinationalize. Inteinational sales giew fiom $8.7
billion in 2uuu to moie than $2u billion in 2u1u
(Skjellevik, 2u11). Foi the top SSu supplieis, on
aveiage S2% of sales aie outsiue of Noiway. ueneially
the sub clusteis with the highest piofit maigins have
the highest peicentage of inteinational sales (ueology,
Seismic anu Biilling), as seen in Figuies 16a anu 16b.
Table 2 shows theii global maiket shaie by oil anu gas piouucing iegions.
The stiength anu giowth potential
of the Noiwegian suppliei base attiact
foieign capital to Noiway. The 0slo Stock
Exchange is the 2
nu
laigest maiket in
Euiope foi eneigy companies anu the 2
nu

laigest woiluwiue foi oil anu gas
supplieis (0slo Bis, 2u12).
)$0,+%5 I1"4'*C F*"$6,1,
The uiamonu foi the Noiwegian oil anu gas suppliei clustei highlights many
stiengths, while also suifacing some conceins foi the futuie (See Figuie 17).
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 21
L%$"+%C "*C 30??'5+1*J Q*C0,+51%,
The oil anu gas suppliei clustei was built upon existing competences in mining,
shipping anu shipbuiluing. These inuustiies have continueu to flouiish as the oil anu gas
suppliei inuustiy has giown, with combineu 2uu7 expoits totaling neaily $S4 billion.
The business seivices clustei has also emeigeu to suppoit the inteinationalization of
Noiway's oil anu gas supplieis; 2uu7 expoits totaleu $12.S billion (BBS ISC, 2u12).
I%4"*C )'*C1+1'*,
The haish Noiwegian climate combineu with stiingent iegulatoiy iequiiements has
leu to many impoitant innovations in oil anu gas technology. The Noiwegian Continental
Shelf is consiueieu an "auvanceu laboiatoiy foi technology," especially in fielu
uevelopment, enhanceu iecoveiy, anu C02 ieuuction.
The fiist impoitant innovation by Noiwegian shipbuilueis in the 197us was
Conueep, the offshoie conciete platfoim. In 1996, a much impioveu iteiation of this
technology, the Tioll A platfoim, became the tallest constiuction that has evei been moveu
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 22
to anothei location. Noiwegian supplieis also inventeu hits, such as floating piouuction
platfoims (1992) anu multiphase tianspoit (1996). Enhanceu oil iecoveiy innovations,
such as watei injection (1986), SB seismic (1979), 4B seismic (1999) anu subsea
piocessing (2uu7), have impioveu iecoveiy iates fiom 17% in 1969 to an aveiage of 46%
in 2u1u, an inciease of $2S billion in total NPv (Sasson, 2u11). In the gas fielu, Sleipnei, the
fiist offshoie Caibon Captuie anu Stoiage (CCS) was staiteu in 1998 anu uepositeu 1
million tons of C02 pei yeai to ieuuce the C02 content fiom 9% to 2.S% (0u21, 2u1u).
Consequently, Noiway has the lowest kilogiams of C02 equivalent pei unit piouuceu in the
woilu (9.2 veisus 1u.1 anu 26 foi Euiope anu Noith Ameiica iespectively). Accoiuing to
the Ninistiy of Petioleum anu Eneigy, "B'' %? ."#+# &00%5*.&%0+ ,*9# *=%-. *+ ."# /#+-'. %? *
,'%+# ,%''*=%/*.&%0 =#.2##0 C>#/*.%/+ *0; D->>'&#/+."
uoing foiwaiu, since the age of "easy oil" is ovei, oil anu gas piouuction globally will
take place in aieas that aie moie anu moie uifficult to access, in ueepei wateis anu haishei
climates. S out of the 8 top oil anu gas uiscoveiies in 2u11 weie offshoie, in uepths ianging
fiom Suu-S,uuu meteis ueep (Kammeizell, 2u12). Noiwegian supplieis aie well positioneu
to take auvantage of this oppoitunity anu pioviue opeiatois with impioveu peifoimance
that tianslates into cost savings anu moie ievenues.
)'*+%.+ ('5 V154 3+5"+%J6 "*C L12"$56
Statoil's uominance in the Noiwegian oil anu gas maiket has put the company in a
unique position to uevelop supplieis anu encouiage innovation. 0n its own, Statoil is not
iecognizeu as an innovation leauei in the inuustiy. As is the case with national R&B
outcomes, Statoil's iesults fiom R&B spenuing aie meuiocie. Statoil spenus u.S1% of sales
on R&B, while Exxon Nobil spenus u.21%. In theii 1u-K, ExxonNobil iepoits moie than
11,uuu patents, while Statoil's filing with the SEC contains no mention of patents, an
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 2S
inuication that theii patenting output is not compelling enough to shaie with investois.
ExxonNobil has 749 patents fileu with the Noiwegian Inuustiial Piopeity Website, while
Statoil only has 677, even though Statoil's 2u1u ievenues in Noiway weie 14 times moie
($84 billion vs. $6 billion) (NIP0 anu Capital IQ, 2u12). Statoil iecognizes in theii 2u-F fileu
with the SEC that "9-," %? %-/ .#,"0%'%)3 ;#5#'%>9#0. &+ ,*//&#; %-. &0 ,'%+# ,%%>#/*.&%0
2&." 0*.&%0*' *0; &0.#/0*.&%0*' -0&5#/+&.&#+E /#+#*/," &0+.&.-.&%0+E *0; +->>'&#/+F C-/
>#/?%/9*0,# &+ +./%0)'3 ;#>#0;#0. %0 %-/ +->>'&#/G+ >#/?%/9*0,#F H# 2%/@ ,'%+#'3 2&." %-/
+->>'&#/+." Statoil is a uemanuing customei that uiives innovation fiom supplieis.
With $24 billion spent in piocuiement anu 12,uuu supplieis, Statoil has cieateu a
best in class suppliei mentoiing piogiam. It uses "Statoil Technology Invest" to take equity
stakes in 2u oil anu gas technology oi ienewable companies. It has the L00P Piogiam,
which gives funuing, pioject suppoit, anu pilot testing to supplieis foi specific technology
concepts. Noie than 26u piojects have been funueu since 199u. It also hosts an annual
Suppliei Bay, wheie the CE0 of Statoil piesents the innovation stiategy to all supplieis.
Seauiill is an example of a Noiwegian Statoil suppliei that has manageu to innovate
anu inteinationalize. Seauiill has giown net income fiom $226 million in 2uu6 to $1.6
billion in 2u1u. 66% of Seauiill's ievenues come fiom outsiue of Noiway. Its numbei 1
customei is Petiobias in Biazil, while Statoil is numbei 2. The case of Seauiill highlights the
challenge ielating to Noiwegian taxes. Although Seauiill's opeiational heauquaiteis aie in
Stavangei, Noiway, its heauquaiteis foi tax puiposes aie in Beimuua. 0ut of the 6u
companies listeu in the Eneigy Inuex on the 0slo Stock Exchange, 6 aie "Noiwegian" oil anu
gas suppliei companies that aie heauquaiteieu in a tax haven.
Statoil also aims to uevelop supplieis outsiue of Noiway thiough "=-&';I&0)J %??+"%/#
,'-+.#/+," with a specific focus on the 0S uulf of Nexico, Biazil, Azeibaijan, anu Angola.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 24
Statoil woiks as a classic keystone, a hub that "9%.&5*.#+ ."# ;#5#'%>9#0. %? 0#2
,*>*=&'&.&#+E >/%,#++#+E *0; .#,"0%'%)&#+" (Iansiti, 2uu4). In its effoits to inteinationalize its
ievenue base, Statoil "&05#+.I+J &0 ."# ;#5#'%>9#0. %? +-+.*&0*='# *0; ,%9>#.&.&5# '%,*'
,%9>*0&#+F H# +->>%/. ."# ;#5#'%>9#0. %? #A>#/.&+# &0 '%,*' ,%99-0&.&#+ *0; *9%0) %-/
+->>'&#/+ *0; ,%0./*,.%/+ &0 %/;#/ .% =-&'; -> '*+.&0) #A>#/.&+# *0; "#'> ."#9 .% ;#5#'%> ."#
+.*0;*/;+ *0; ,#/.&?&,*.&%0 +,"#9#+ /#K-&/#; ?%/ 2%/@ &0 ."# %&' *0; )*+ &0;-+./3" (Statoil,
2u12). Closei to home anu capitalizing on its Aictic opeiational competences, Statoil has a
SS% shaie in PioBaients, a suppliei incubatoi piogiam aimeu at ueveloping a local
suppliei base in Noithein Noiway anu Nuimansk, Russia. As both Statoil anu the supplieis
continue to inteinationalize as piouuction shifts to geogiaphies othei than Noiway, one
concein is how connecteu these fiims will iemain to theii Noiwegian locations.
V"/+'5 )'*C1+1'*,
The stiength of the human capital available is a souice of concein. Noiway has a
lowei peicentage of science anu engineeiing giauuates (12%) than the 0ECB aveiage
(1S%) (0ECB, 2uu9); these uegiees pioviue the founuational tiaining foi many of the ioles
in the oil anu gas suppliei clustei. In auuition to the shoitage of engineeis, oil anu gas has a
peiception issue. An incieasing numbei of Noiwegian engineeiing giauuates choose to
"?%,-+ %0 /#0#2*='# #0#/)3 *0; %."#/ .#,"0%'%)&#+ ."*. */# >#/,#&5#; .% =# #05&/%09#0.*''3
?/&#0;'3" (Sasson 2u11). The shaie of engineeis is actually ueclining in some of the suppliei
sub clusteis (Topsiue, ueology anu Seismics, anu 0peiations Suppoit). Fiims have pluggeu
this gap with foieign laboi. The peicentage of foieign laboi in the clustei incieaseu fiom
4% in 2uuu to 8% in 2uu8 (Sasson, 2u11).
Although oil anu gas is the best paiu sectoi in Noiway with an aveiage annual salaiy
of $12u,uuu, the wage compiession in the inuustiy uoes not pioviue woikeis with
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 2S
sufficient incentives to auvance theii caieeis oi impiove theii skills with auuitional
tiaining. (See Figuie 18.) Amii Sasson iuentifies an inteiesting tienu: "!"# +&)0&?&,*0.
&0,/#*+# &0 ."# 2%/@?%/,# 2&." =-+&0#++ *0; #,%0%9&,+ ;#)/##+ *0; %."#/ +%,&*' +,&#0,#
;#)/##+ %5#/ ."# '*+. #&)". 3#*/+ 9*3 &0;&,*.# * +"&?. ?/%9 ."# ;#5#'%>9#0. %? 0#2 >/%;-,.+
*0; +#/5&,#+ .% ."# ,%99#/,&*'&7*.&%0 %? *'/#*;3 ;#5#'%>#; >/%;-,.+ *0; +#/5&,#+." This may
suggest a ")/*;-*' ,"*0)# &0 2%/@?%/,# ,%9>%+&.&%0 *0; +./*.#)&, >%+&.&%0&0) 2&."&0 ."#
&0;-+./3F !"# ."/## *>>*/#0. 9#,"*0&+9+L."# '*,@ %? K-*'&?&#; >#/+%00#'E *0 #A>#,.*.&%0 %?
;#,/#*+&0) /#.-/0+ %0 &05#+.9#0.+ &0 #0)&0##/&0) =*+#; >/%M#,.+E %/ ."# %??+"%/&0) %?
#0)&0##/&0) *,.&5&.&#+N*/# '&@#'3 .% 0#)*.&5#'3 *??#,. ."# +-+.*&0*=&'&.3 %? ."# 1%/2#)&*0 %&'
,'-+.#/" (Sasson, 2u11).

)'4?%+1*J )$0,+%5,
The Noiwegian oil anu gas suppliei clustei faces competition fiom Bouston, 0S; Rio
ue }aneiio, Biazil; anu Abeiueen, Scotlanu, which shaies the Noith Sea assets. Although the
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 26
Noiwegian suppliei clustei is enjoying stiong giowth fiom inteinationalization, its
stiategic position as a technology uiiven innovatoi is thieateneu. Noiway uoes not have
the scale of Bouston, which has almost 18 times as many fiims (Capital IQ, 2u12). The
clustei size in Abeiueen, Scotlanu is ioughly the same as Stavangei, Noiway, but the two
clusteis have positioneu themselves uiffeiently, anu Abeiueen has bettei patenting output.
Abeiueen is known foi piocess innovations; theie weie 78u 0S patents fiom this clustei up
to 2uuS, compaieu to only 412 Stavangei-ielateu 0S patents in the same time peiiou
(Batakenaka, 2uu6). Rio ue }aneiio may pose the biggest thieat to the Noiwegian suppliei
clustei. In Biazil, the goveinment has put in place local suppliei iequiiements similai to
what Noiway hau in the 197us. With these piotectionist policies in place, Rio's 64% state-
owneu Petiobias has manageu to inciease the peicentage of Biazilian supplieis hiieu to
woik on the company's oil anu gas piojects fiom SS% in 2uuS to 77.S4% in 2u11
(Petiobias, 2u11). While Noiway's piouuction has peakeu, Biazil's piouuction is uoubling
to 6 million baiiels pei uay by 2u2u. Theie is a ieal uangei that Biazil coulu ieplace the
Noith Sea as the "auvanceu laboiatoiy foi technology."
Q*,+1+0+1'*, ('5 )'$$"#'5"+1'* UQV),W
IFCs play an impoitant iole in the Noiwegian oil anu gas suppliei clustei. Theie aie
active IFCs at the iegional (NCE Subsea, Noiwegian 0ffshoie Biilling anu Engineeiing
|N0BEj), national (Konkiaft, Aiena, 0il Inuustiy Association |0LFj, INST0K, Noiwegian
Petioleum Society |NPFj, 0u21, anu the Navitas Netwoik) anu Euiopean level (Euiopean
Clustei Alliance). In the Southein pait of Noiway, the N0BE IFC has incieaseu the numbei
of engineeis employeu anu iate of innovation foi affiliateu suppliei fiims (Sasson, 2u11).
The uynamic activity of the IFCs uemonstiates the matuiity of the clustei.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 27
E7 L%/'44%*C"+1'*,
The key challenges anu iecommenuations aie pioviueu in oiuei of piioiity.
)'0*+56 Y%2%$ L%/'44%*C"+1'*,
)B"$$%*J% *'7 9K !5"*,('54"+1'* '( +B% -/'*'46 1* +B% H',+\'1$ -5"
Noiway's vision foi its competitive position globally is a knowleuge-baseu, innovation-
uiiven economy, uevelopeu fiom existing stiengths. But it has significant woik to uo to
iealize this vision, as piouuctivity is ueclining in ielation to peeis anu the cuiient clustei
poitfolio has low uiveisification, with a few successful, natuial iesouice-baseu clusteis.
L%/'44%*C"+1'*,: Foimulate anu launch a tactical post-oil Roau Nap that implements
the vision anu meets the challenges of high laboi costs anu ueclining piouuction anu
ievenues fiom the oil anu gas sectoi. At the centei of this ioau map must be a
compiehensive clustei policy, which bettei links euucation, tiaining, R&B, iegulation,
inuustiial policies, taxation, maiket anu uemanu sophistication, physical infiastiuctuie,
capital maikets, anu alieauy existing companies. Biawing on its long histoiy of wisely
ueveloping its iich natuial iesouices, Noiway shoulu fuithei builu its stiategic position as
a ieliable, innovative anu "clean anu gieen" countiy. 0peiationally, the cential goveinment
shoulu woik closely with the piivate sectoi, acauemia anu unions in a bottom up appioach
to cieate solutions tailoieu to local anu iegional stiengths. The goveinment shoulu cieate a
bioau-baseu national competitiveness commission with a peimanent secietaiiat in 0slo
anu with bianches at the local level to piomote this piocess anu pioviue accountability.
)B"$$%*J% *'7 8K :?%**%,, '( +B% -/'*'46
Noiway's economy is closeu anu insufficiently uiveisifieu with limiteu local competition.
L%/'44%*C"+1'*,: Launch an ambitious "Plan to Attiact FBI" that moie aggiessively
puisues FBI thiough tiaue missions, ieuuceu iegulatoiy buiuen, anu bilateial tiaue
agieements with uistant maikets. Noiway shoulu establish a goveinment agency to
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 28
piomote inwaiu FBI,
S
which coulu be houseu in Innovation Noiway missions abioau, anu
which uiaws upon ueuicateu talent anu a sepaiate buuget. The iole of the state must be
balanceu against the neeu to attiact foieign capital anu know-how anu piomote
competition. The goveinment shoulu also taiget incieasing the tiaue flows of the non-oil
economy by fosteiing iegional integiation (Baltic iegion, Scanuinavia + Russia, etc.).
)B"$$%*J% *'7 =K Q**'2"+1'* 36,+%4
R&B ielies heavily on public spenuing, leauing to lowei outcomes than peei countiies. R&B
is not uiiving the tiansfoimation of the economy, but is seiving existing inuustiies.
L%/'44%*C"+1'*,: The system foi public expenuituie on R&B shoulu be ievieweu anu
iefoimeu with incieaseu focus on efficiency anu accountability foi outcomes. Public
funuing shoulu not be a ioutine souice of financing foi the piivate sectoi but an instiument
to coiiect maiket failuies anu heuge technological iisks. Innovation anu quality of R&B
may be impioveu in thiee ways: i) using existing capabilities in successful inuustiies with a
"Piogiam foi Spilloveis," ii) fosteiing inteinational coopeiation to inciease the
sophistication of local capabilities, woiking at thiee levels: acauemia, goveinment anu
fiims, anu iii) impioving the linkages between R&B anu stait-ups that commeicialize new
technologies thiough IFCs anu new anu moie compiehensive public-piivate paitneiships.
)B"$$%*J% *'7 @K [%C104 "*C O1JB%5 -C0/"+1'*
The quality of high-level tiaining in science anu technology lags peeis, anu the outcomes in
science anu mathematics uo not match the levels of expenuituie.
L%/'44%*C"+1'*,: Review anu stiengthen the science cuiiiculum in piimaiy anu
seconuaiy euucation. Noiway shoulu finu ways to make science anu technology moie
attiactive foi youth, inciease the public iecognition of technical caieeis, anu place a special

S
Noiway cuiiently uoes not have any agency ueuicateu to attiacting inwaiu FBI. The Woilu Bank useu the sub-national
0slo Teknopol to assess the countiy's investment stiategy.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 29
focus on women. The goveinment shoulu fostei moie coopeiation between inuustiy anu
acauemia both nationally anu inteinationally to piomote excellence. The numbei of co-op
oppoitunities foi univeisity stuuents shoulu be incieaseu.
)$0,+%5 Y%2%$ L%/'44%*C"+1'*,
)B"$$%*J% *'7 9K 3B'5+"J% '( 3]1$$%C Y"#'5 "*C Q*,0((1/1%*+ Q*/%*+12%,
The clustei is facing a shoitage of engineeis anu othei uomestic skilleu laboi uue to lack of
supply anu misalignment of incentives that thieatens the giowth of the clustei.
L%/'44%*C"+1'*,: Attiact skilleu foieign laboi. Following the example of the Paitneiship
between Statoil anu the 0niveisity of Texas at Austin, fiims shoulu inciease coopeiation
with top foieign univeisities. They shoulu sponsoi science-baseu competitions with cash
piizes at the univeisities to inciease visibility of theii fiim as a potential employei. Fiims
shoulu bettei align iesults anu iewaius (caieei uevelopment, iecognition, pay) foi entiy
anu miu-level manageis. They shoulu invest in cultuie-builuing piogiams that make theii
companies attiactive. Fiims shoulu position themselves as being on the cutting euge of the
sustainability tienu anu sell the oppoitunity to innovate aiounu clean technologies.
)B"$$%*J% *'7 8K I%/$1*1*J :1$ H5'C0/+1'*
Beclining oil piouuction ieuuces the home-maiket size anu oppoitunities foi innovation.
L%/'44%*C"+1'*,: Woik on a national agieement to open the Baients Sea foi
exploiation anu fuithei uevelop stiingent iegulation, to foice innovation aiounu safety,
enhancing iecoveiy iates anu enviionmental piotection anu sustainability. As pait of theii
talent acquisition anu giowth stiategies, oil anu gas supplieis shoulu taiget specific
spillovei technologies to ielateu inuustiies, such as ienewable anu caibon captuie anu
sequestiation. Fiims shoulu also fuithei uevelop R&B satellite facilities in expoit countiies
in oiuei to stay ielevant to technological uevelopments.
)B"$$%*J% *'7 =K Q*+%5*"+1'*"$1^"+1'* U["5]%+ :??'5+0*1+1%, "*C N%'?'$1+1/"$ L1,],W
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 Su
L%/'44%*C"+1'*,: In suppoit of seizing maiket oppoitunities foi fiims, goveinment
action shoulu integiate tiaue anu foieign policy inteiests to mitigate geopolitical iisks.
Noiway shoulu maintain the Noiwegian 0il foi Bevelopment Initiative, which focuses on
capacity builuing aiounu iesouice management, ievenue management, anu enviionmental
piotection in moie than 2u ueveloping countiies. In auuition to paitneiing with Statoil's
effoits to "maximize shaieu value,"
4
inuiviuual oil anu gas suppliei fiims shoulu uevelop
compiehensive local content stiategies in foieign maikets, which outline S-1u yeai tactics
foi investing in the skills of local woikeis anu making stiategic community investments.
They also shoulu sponsoi exchange assignments in Noiway foi local staff.
)B"$$%*J% *'7 @K Y'; )',+ V'5%1J* )'4?%+1+'5,
Competing clusteis thieaten Noiway's innovative, but high cost stiategic positioning.
L%/'44%*C"+1'*,: Bevelop paitneiships with fiims anu IFCs in emeiging clusteis, in
paiticulai Biazil. Supplieis shoulu ieciuit local talent by offeiing highei salaiies than
competitois anu actively benchmaik to stay aheau of poaching effoits.
)B"$$%*J% *'7 EK Y',, '( !1%, +' <'5;"6
With inteinationalization as the coie stiategy foi giowth, suppliei fiims iisk losing theii
Noiwegian iuentities anu may shift heauquaiteis uue to tax oi maiket incentives.
L%/'44%*C"+1'*,K Initiate a uialogue with business leaueis with iegaiu to secuiing the
maintenance of long teim ioots in Noiway. This woiks to the clustei's stiategic auvantage.
Accoiuing to Nichael Poitei, "The stiongest inteinational competitois will often be those
that can establish ueepei ioots in impoitant communities. Companies that can embiace
this new locational thinking will cieate shaieu value" (Poitei, 2u11).

4
Foi example, Statoil has a Nanagement anu Technology Tiansfei Piogiam with the Angolan national oil company.
!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 S1
I1,/$',05%, "*C I1,/$"14%5,
0ne of the authois, Ni. Paul Klouman Bekken, is on leave fiom the Noiwegian Ninistiy of
Foieign Affaiis. Bowevei, the views in this aiticle shoulu not be attiibuteu to the
Noiwegian Ninistiy of Foieign Affaiis.

G7 Z1#$1'J5"?B6
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!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 SS

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!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 S4
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!"# %&' ( )*+ ,'-+.#/ &0 1%/2*3 SS
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m2uF.puf

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X7 3'05/%, ('5 V1J05%, "*C !"#$%,

Figuie 1: uoogle Naps
Figuie 2: Statistics Noiway, Woilu Bank Batabase, 0ECB
Figuie S: 0ECB
Figuie 4: 0ECB
Figuie S: Woilu Bank
Figuie 6: Team Analysis, Baivaiu Business School Institute foi Stiategy anu
Competitiveness
Figuie 7: Baivaiu Business School Institute foi Stiategy anu Competitiveness
Figuie 8: 0ECB
Figuie 9: Euiostat 2u1u, Noiway: 0ECB Reviews of Innovation Policy
Figuie 1u: 0NCTAB 2u1u
Figuie 11: 0ECB Inuicatois of Piouuct Naiket Regulation 2uu8
Figuie 12: Team Analysis, 0ECB
Figuie 1S: Team Analysis
Figuie 14: Team Analysis
Figuie 1S: "Knowleuge Baseu 0il anu uas Inuustiy."
Figuie 16: "Knowleuge Baseu 0il anu uas Inuustiy."
Figuie 17: Team Analysis
Figuie 18: Statistics Noiway, 0S Bepaitment of Laboi (auapteu by Team Analysis)
Table 1: Team Analysis, "Knowleuge Baseu 0il anu uas Inuustiy."
Table 2: "Knowleuge Baseu 0il anu uas Inuustiy."