ASSESSMENT OF ABSORPTIVE CAPACITY AND INNOVATION CAPABILITY OF OIL & GAS COMPANIES IN GAS – TO – POWER PROJECTS IN NIGERIA

Abstract

Absorptive capacity is key in achieving innovation, and innovation is a strategic differentiating factor for having competitive advantage among firms in an industry. However, competitive advantage is beyond innovation but on the underlying capabilities that makes innovation possible. Therefore, for a knowledge driven petroleum industry, Nigeria’s abundant natural gas becomes strategic in bridging electric power demand and supply, which necessitated the seven (7) critical gas – to – power projects in Nigeria, by the Nigeria national petroleum corporation in 2017. This study, thus established an empirical relationship between absorptive capacity and innovation capability for oil and gas companies executing gas – to – power projects in Nigeria. The questionnaires retrieved (50.25% retrieval rate) were subjected to data treatment and reliability test, where the variables were above a cronbach alpha value of 0.7. These data were analyzed using research methods of mean score rating, factor analysis and multiple regression analysis in Statistical Package for Social Science (SPSS) version 25.0. The results of the research revealed a mean response rating of absorptive capacity of 7.076 and innovation capability of 7.20, indicating a high level and that the company’s employees are the custodian of the company’s knowledge but the companies have low Research and Development (R and D) activities. Moreover, the study findings revealed a significant positive relationship between absorptive capacity and its determinants (R = 0.751, R2 = 0.564 and sf = 0.000, p<0.05), where formalization is the most significant determinant at a beta value of 0.461. In addition, the study results also showed that there is a positive correlation between innovation capability and its influencing factors at (R = 0.641, R2 = 0.411, sf = 0.000, p<0.05), where internal knowledge is the most predominant contributing factor to innovation capability. Furthermore, the research results revealed that absorptive capacity has a significant positive effect on innovation capability at (R = 0.754, R2 = 0.568, sf = 0.000, p<0.05) which means, absorptive capacity is directly proportional to innovation capability. The study results also discovered that administrative bottleneck is the most prevailing challenge of innovation in the companies under study. In conclusion, the project success of the gas – to – power projects will be relatively high despite their company’s high level of absorptive capacity and innovation capability but because of their companies’ low knowledge exploitation and technological capability level. The study, thus recommended a synergy between all concerned stakeholders in the industry and an establishment of an energy bank to fund Research and Development activities in the industry to optimize Nigeria’s abundant gas resources for electricity generation.