IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2015-04-05.html
   My bibliography  Save this article

Path Dependency in the Energy Industry: The Case of Long-term Oil-indexed Gas Import Contracts in Continental Europe

Author

Listed:
  • Peter Buhanist

    (Department of Management, Estonian Business School, Tallinn, The Republic of Estonia)

Abstract

This paper seeks to explain the persistence of a business model that was instrumental in creating pan-European natural gas markets but refused to retire when the markets outgrew it. Long-term oil-indexed agreements enabled the emergence of international gas markets in Europe since the early 1960s and they still govern gas imports to the European Union. Yet, they failed to evolve with the changing business environment, resulting in the strategic costs for the companies. A politicized topic, research has thus far focused on national and regional levels, largely ignoring company level processes. This article contributes to the understanding of European gas markets by introducing a company level behavioral explanation of the endurance of an institutionalized but seemingly outdated business model. Path dependence is found to be a major contributing factor of the behavior of agents. Business leaders and governments alike will benefit from learning to identify and avoid path dependent behavior that leads to potentially sub-optimal outcomes.

Suggested Citation

  • Peter Buhanist, 2015. "Path Dependency in the Energy Industry: The Case of Long-term Oil-indexed Gas Import Contracts in Continental Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 934-948.
    • Handle: RePEc:eco:journ2:2015-04-05
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijeep/article/download/1298/849
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijeep/article/view/1298/849
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Saleh Mothana Obadi & Matej Korcek, 2015. "Investigation of Driving Forces of Energy Consumption in European Union 28 Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 422-432.
    2. Rodolphe Durand & Eero Vaara, 2009. "Causation, counterfactuals, and competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 30(12), pages 1245-1264, December.
    3. Jamal BOUOIYOUR & Refk SELMI & Ilhan OZTURK, 2014. "The Nexus between Electricity Consumption and Economic Growth: New Insights from Meta-Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 621-635.
    4. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
    5. Raghu Garud & Arun Kumaraswamy & Peter Karnøe, 2010. "Path Dependence or Path Creation?," Journal of Management Studies, Wiley Blackwell, vol. 47(4), pages 760-774, June.
    6. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    7. Neuhoff, K. & von Hirschhausen, C., 2005. "Long-term vs. Short-term Contracts; A European perspective on natural gas," Cambridge Working Papers in Economics 0539, Faculty of Economics, University of Cambridge.
    8. Al Mamun, Md. & Sohag, Kazi & Hannan Mia, Md. Abdul & Salah Uddin, Gazi & Ozturk, Ilhan, 2014. "Regional differences in the dynamic linkage between CO2 emissions, sectoral output and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1-11.
    9. Pierre Noël, 2013. "EU Gas Supply Security: Unfinished Business," Cambridge Working Papers in Economics 1312, Faculty of Economics, University of Cambridge.
    10. Pierre Noël, 2013. "EU Gas Supply Security: Unfinished Business," Working Papers EPRG 1308, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    11. Rodolphe Durand & Eero Vaara, 2009. "Causation, counterfactuals, and competitive advantage," Post-Print hal-00457799, HAL.
    12. Rodolphe Durand & Eero Vaara, 2009. "Causation, counterfactuals and competitive advantage," Post-Print hal-02312531, HAL.
    13. Jean‐Philippe Vergne & Rodolphe Durand, 2010. "The Missing Link Between the Theory and Empirics of Path Dependence: Conceptual Clarification, Testability Issue, and Methodological Implications," Journal of Management Studies, Wiley Blackwell, vol. 47(4), pages 736-759, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Boying & Zheng, Mingbo & Zhao, Xinxin & Chang, Chun-Ping, 2021. "An assessment of the effect of partisan ideology on shale gas production and the implications for environmental regulations," Economic Systems, Elsevier, vol. 45(3).
    2. Brown, Marilyn A. & Li, Yufei & Soni, Anmol, 2020. "Are all jobs created equal? Regional employment impacts of a U.S. carbon tax," Applied Energy, Elsevier, vol. 262(C).
    3. Pablo Cansado-Bravo & Carlos Rodríguez-Monroy, 2018. "Persistence of Oil Prices in Gas Import Prices and the Resilience of the Oil-Indexation Mechanism. The Case of Spanish Gas Import Prices," Energies, MDPI, vol. 11(12), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jean‐Philippe Vergne & Rodolphe Durand, 2010. "The Missing Link Between the Theory and Empirics of Path Dependence: Conceptual Clarification, Testability Issue, and Methodological Implications," Journal of Management Studies, Wiley Blackwell, vol. 47(4), pages 736-759, June.
    2. Martin Henning & Erik Stam & Rik Wenting, 2013. "Path Dependence Research in Regional Economic Development: Cacophony or Knowledge Accumulation?," Regional Studies, Taylor & Francis Journals, vol. 47(8), pages 1348-1362, September.
    3. Magali Malherbe & Fanny Simon-Lee, 2015. "Learning and knowledge accumulation as sources of influence for actors during path constitution: the example of the emergence of NFC technology," Post-Print hal-01597620, HAL.
    4. James Simmie, 2020. "Agency, new technological path creation and long waves of local economic growth in Oxfordshire," Local Economy, London South Bank University, vol. 35(8), pages 723-746, December.
    5. GianPaolo Abatecola, 2012. "Path Dependent Entrepreneurs? A Decision Making Perspective," DSI Essays Series, DSI - Dipartimento di Studi sull'Impresa, vol. 24.
    6. Garud, Raghu & Gehman, Joel, 2012. "Metatheoretical perspectives on sustainability journeys: Evolutionary, relational and durational," Research Policy, Elsevier, vol. 41(6), pages 980-995.
    7. Schmidt, Tobias S. & Battke, Benedikt & Grosspietsch, David & Hoffmann, Volker H., 2016. "Do deployment policies pick technologies by (not) picking applications?—A simulation of investment decisions in technologies with multiple applications," Research Policy, Elsevier, vol. 45(10), pages 1965-1983.
    8. Verdu-Jover, Antonio J. & Alos-Simo, Lirios & Gomez-Gras, Jose-Maria, 2018. "Adaptive culture and product/service innovation outcomes," European Management Journal, Elsevier, vol. 36(3), pages 330-340.
    9. Law, Florence, 2018. "Breaking the outsourcing path: Backsourcing process and outsourcing lock-in," European Management Journal, Elsevier, vol. 36(3), pages 341-352.
    10. Johann Fortwengel & Arne Keller, 2020. "Agency in the face of path dependence: how organizations can regain scope for maneuver," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1169-1201, November.
    11. Sven M. Laudien & Birgit Daxböck, 2016. "Path dependence as a barrier to business model change in manufacturing firms: insights from a multiple-case study," Journal of Business Economics, Springer, vol. 86(6), pages 611-645, August.
    12. E. Moreva L. & Е. Морева Л., 2017. "Бизнес-Модель И Ее Роль В Разработке Инновационной Политики (Анализ Зарубежных Концепций) // The Business Model And Its Role In The Development Of The Innovation Policy (Analysis Of Foreign Concepts)," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 21(4), pages 126-137.
    13. Nicholas S. Argyres & Alfredo De Massis & Nicolai J. Foss & Federico Frattini & Geoffrey Jones & Brian S. Silverman, 2020. "History‐informed strategy research: The promise of history and historical research methods in advancing strategy scholarship," Strategic Management Journal, Wiley Blackwell, vol. 41(3), pages 343-368, March.
    14. Benjamin Mueller & Nils Urbach, 2021. "Understanding strategy assessment in IS management," Information Systems and e-Business Management, Springer, vol. 19(4), pages 1245-1273, December.
    15. Ann Hartell, 2013. "Path dependence in economic theory and research," SRE-Disc sre-disc-2013_03, Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business.
    16. Timo Ehrig & Jens Schmidt, 2022. "Theory‐based learning and experimentation: How strategists can systematically generate knowledge at the edge between the known and the unknown," Strategic Management Journal, Wiley Blackwell, vol. 43(7), pages 1287-1318, July.
    17. Phillip H. Kim & Karl Wennberg & Gregoire Croidieu, 2016. "Untapped Riches of Meso-Level Applications in Multilevel Entrepreneurship Mechanisms," Post-Print hal-02276717, HAL.
    18. Hartell, Ann, 2013. "Path dependence in economic theory and research," SRE-Discussion Papers 2013/03, WU Vienna University of Economics and Business.
    19. Neil Kay, 2013. "Lock-in, path dependence, and the internationalization of QWERTY," Working Papers 1310, University of Strathclyde Business School, Department of Economics.
    20. Sydow, Jörg & Schreyögg, Georg & Koch, Jochen, 2020. "Current interest in the theory of organizational path dependence: A short update on the occasion of the 2019 AMR Decade Award," Discussion Papers 2020/12, Free University Berlin, School of Business & Economics.

    More about this item

    Keywords

    Gas Trade; Gazprom; Path Dependence;
    All these keywords.

    JEL classification:

    • F - International Economics
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2015-04-05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.