A political economy of national oil companies and late industrialisation: the case of supplier development in Malaysia
Paper short abstract:
This paper examines the role of a state-owned oil company in developing local supplier firms, focusing on the case of Malaysia's Petronas. Drawing on fieldwork, it shows how Petronas's commercial and developmental missions have simultaneously nurtured and disciplined successful supplier firms.
Paper long abstract:
Much scholarly attention has recently been given to role of local content policies in oil-based industrialization and the opportunity and challenges of firm upgrading in the supply chains of private 'International Oil Companies' (IOCs). Yet, the role of a state-owned 'National Oil Company' (NOC) as an industrial policy instrument for developing domestic supplier companies remains largely underexplored. This paper examines the role of Malaysia's fully state-owned NOC Petronas in the emergence and growth of large, internationally competitive Malaysian supplier firms. Drawing on corporate histories of the two largest domestic supplier companies and industry fieldwork in Malaysia, this paper demonstrates that Petronas - tasked with commercial, regulatory and developmentalist mandates - has nurtured high-performing, yet politically-connected supplier firms. Petronas - as an oil company with monopoly rights and largely driven by commercial interests to maximise revenue to the state - has not only allocated learning and technology rents to suppliers, but also disciplined them in various intended and unintended ways. Taking a political economy perspective, it is argued that the power dynamics in this NOC-supplier relationship matter. The balance of power between Petronas and suppliers has created the necessary compulsion for these politically-connected supplier firms to become internationally competitive on export markets.
Global value chains, the state and the political economy of development