Does Size Matter...in Oil and Gas Sector?

Report debunks myths tied to energy firms of all sizes to facilitate sound policymaking

CALGARY, July 19, 2012 /CNW/ - In a report published today by The School of Public Policy, authors Robert Mansell, Michal Moore, Jennifer Winter and Matt Krzepkowski challenge some common misconceptions about firm size in the energy industry.

The authors conduct an empirical analysis of the behaviour and performance of 340 Emerging Juniors, Juniors, Intermediates and Majors around key metrics like employment growth and productivity of assets.

"These differences in size, role and performance must be understood to help guide the formulation of sound public policy," Mansell said today.

One myth that the authors tackle is the notion that small companies have higher growth rates, create more jobs and are more innovative, and therefore should be treated preferentially compared to large companies in areas such as tax policy.

Their analysis finds that the largest firms (with over 500 employees) showed the highest rate of employment growth and accounted for almost 70 percent of the employment increase in the oil and gas sector over 2000-2008.

Majors also showed far more stability over this time period: the variation of Majors in operation ranged between 13 and 15 firms, whereas the number of Emerging Juniors fluctuated between 34 and 144, and Juniors between 28 and 69.

Based on these findings the authors conclude that "while Emerging Juniors and Juniors represent an important entrepreneurial element of the oil and gas sector, if the objective is employment or activity creation in this sector, it is unlikely that policies targeting smaller firms would be effective in achieving these objectives."

In terms of a takeaway for government, Mansell said "policymakers should favour neutrality rather than entertain demands for preferential treatment for firms of specific sizes."

The report can be found at www.policyschool.ucalgary.ca/publications

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