Strategic Resource Decay: Evidence from the Upstream Oil and Gas Industry

According to the strategic resource decay framework, most strategic resources lose their value endogenously (over time and/or upon deployment), a process that potentially threatens firm performance and competitive advantage. On the other hand, firms might be able to deal with this threat by taking the appropriate resource-related actions. To date, the relationship between strategic resource decay and firm performance as well as the moderating role resource management plays in this relationship have not been empirically examined. In this first empirical investigation of the strategic resource decay framework, we find support that, regardless of its predictable nature, the decay of their oil and gas reserves negatively affects the financial performance of upstream oil and gas companies. Further, we take a nuanced look and analyze how resource structuring and bundling activity of the firm affect this relationship, respectively. Our results indicate that, while both action types have significant main effects on firm performance, only the resource bundling activity of the firm attenuates the negative SRD-firm performance relationship and that resource structuring is not a viable way for the firms in our sample to counter strategic resource decay.