Maintaining corporate dominance after decolonization: the ‘first mover advantage’ of Shell‐BP in Nigeria

Nigeria's oil industry came into being during colonial rule. Preferential treatment by British colonial authorities had given a British oil company — Shell — a virtual monopoly over oil exploration in the country and Shell has remained the dominant oil company in Nigeria. While there is substantial evidence to suggest that Shell‐BP established its dominant position in Nigeria with the support of British colonial officials, it was by no means clear that Shell would be able to maintain this advantageous position. Indeed, the historical record shows that both the Nigerian government and a number of competitors posed a potential threat to Shell's dominant position. The purpose of this article is to answer the question why Shell was able to maintain a position of dominance in Nigeria. It examines Nigeria's diversification and nationalisation policies from the late 1950s to‐date with the view of identifying the factors which allowed Shell to maintain its position vis‐à‐vis potential competitors. This investigation is based on the analysis of secondary sources as well as documents from the Public Record Office (PRO) in London and the BP Archive. In order to explain Shell's dominance in Nigeria, the article proposes to utilise the concept of a ‘first mover advantage’. On the most basic level, this concept suggests that pioneering firms are able to obtain positive economic profits as the consequence of early market entry, that means, profits in excess of the cost of capital. The article concludes that a micro‐theoretical analysis based on the idea of a ‘first mover advantage’, which explores the position of individual corporate entities within a political economy framework, provides a superior explanation of Shell's dominance in Nigeria as compared to conventional macro‐theoretical structuralist approaches.