Support services in the extractive industries and the role of innovation
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ORIGINAL PAPER
Support services in the extractive industries and the role of innovation Zauresh Atakhanova 1 Received: 24 November 2019 / Accepted: 1 September 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract While representing a subset of all services outsourced by resource producers, support services account for 30% of employment in extractive industries in the OECD countries. Unlike mining and energy extraction, support services are the only subsector of the extractive industries where industrialized countries continue to dominate international trade. This suggests that despite producing 80% of the value of global output of extractive industries, emerging economies face difficulties in producing internationally competitive support services. As a result, we analyze the experience of industrialized countries and formulate policy implications for those emerging economies that aim at developing internationally competitive support services in extractive industries. By analyzing existing literature, historical data for the USA, and recent cross-country evidence, we conclude that support services are skill-intensive and benefit from the economy-wide innovation (as proxied by R&D spending). This implies that policy-makers in emerging economies should not only target innovation in the extractive industries but also likewise pursue long-term policies of building knowledge-based economies. Keywords R&D . Innovation . Mining services . Oilfield services JEL Classification L70 . O3 . Q3
Introduction Experience of resource-rich industrialized nations in creating diversified and innovative economies presents great interest to those developing countries that aspire to realize the potential of sustainable development offered by abundant nonrenewable natural resources. Our study contributes to the literature on mineral resource-based development by bringing forward the importance of innovation-intensive support services as a distinguishing factor of resource-rich industrialized countries. Using cross-country data, we find that even though emerging economies play an important role in two large segments of extractive industries, they are under-represented in the third one. Specifically, during 2005–2015, non-OECD nations accounted for an average of 45% and 80% of global exports in non-energy mining and energy extraction, * Zauresh Atakhanova [email protected] 1
School of Mining and Geosciences, Nazarbayev University, Nur-Sultan, Kazakhstan
respectively. However, these countries’ share of global exports of support services represented only 20%. Although the market for support services represents the smallest part of the overall extractive industry, accounting for 8% of the latter’s value, employment in this subsector in the OECD countries represents on average 30% of the total number of people employed in the extractive industries. In fact, during 2005–2015, support services were the fastest growing subsector among the extractive industries in OECD countries with its employment increasing at an ave
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