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Abstract:
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Some oil refining companies have recently entered the field of exploration and production (E &P ) . Both the relatively high financial performances of E &P companies and the shrinking refining margin may motivate refiner’s decision to enter E &P . However , in making this decision , there are other factors to be considered . This study utilizes vertical integration and diversification theories to develop an integrated framework . This framework determines the factors which should be involved in a firm’s decision to enter another business area . In this theoretical approach and its application to Korean refining companies’ decision to enter into E &P , we discuss both the cost benefits and the advantages to acquiring strategic assets of the new business . As sources of short -term cost benefits , the paper discusses site specificity and regional performance . As long -term requirements , the paper explores the need to acquire E &P strategic assets . In early -stage decision making , the best mode may be a small equity investment in regional consortia . As a company acquires more and more strategic assets , it can decide to pursue global opportunities and /or to acquire an E &P company . |