As a result of the above challenges, some of the major IOCs adopted OE, which had significantly improved efficiency in their operations. However, even the most successful OE program needs improvement because new regulations are enacted, new risks are emerging, employees are demanding for a healthier and safer working environment, and new tools and technologies are discovered. Although studies have been conducted in the field of operational excellence, most of the studies were in manufacturing and service industries. Researchers like [11, 23, 37, 39, 40] conducted studies on OE, but none of them considered risk management determinants as variables affecting OE, also no traced study conducted in the oil and gas sector in Malaysia. Regarding the above-mentioned issues, this study is aimed at developing a conceptual framework that will depict the determining effect of ERM determinants on OE as well as show the mediating effect of ERM implementation between the determinants and OE in the Malaysian oil and gas industry.
Conceptual framework
The conceptual framework is a schematic depiction of the interactions between variables of interest in a study [4]. It helps in explaining the linkage and flow of the relationship among variables of a study. In the current article, it displayed how regulatory framework connects with operational excellence directly and through ERM implementation, which applies all through the other variables, as shown in Fig. 1.
Dimensions of the study variables
This section describes the various dimensions adopted to explain and measure each of the variables in this study. The dependent variable OE’s dimensions include health and safety, reliability, efficiency and the environment [5, 12, 16,17,18,19,20,21, 24, 29]. Here, many of the indices are grouped to reduce the number of items to a considerate and reasonable figure. Health and safety are further broken into elements which include security, injuries and health assurance. Reliability, on the other hand, includes asset design and maintenance, downtime and product availability. Efficiency has to do with improved productivity, cost reduction, quality improvement and waste reduction. The environment deals with issues like the volume of waste, the safety of host communities and the social interactions.
The independent variables like regulatory framework are measured by the number of regulatory bodies, regulations and the enforcement of the laws as supported by Abu Bakar et al. [2], Bolu [8], Viscusi [43]. Firm characteristics have three dimensions adopted from earlier studies [3, 26,27,28, 30] that include firm size, ownership and business complexity. Also staff capacity’s constructs include training methods, content of the training and evaluation as posit and used by Cole [14], Danziger and Dunkle [15], Kumsuprom et al. [31], Chileshe et al. [13]. The last but not the least among the variables, information technology would be operationalized by the process needs of IT, IT infrastructure and control process as suggested by Pagach and Warr [34], Wilson et al. [45]. The mediating variable ERM implementation would be measured using three constructs such as governance, structure and process of risk management implementation as used by Lai and Samad [32], Ping and Muthuveloo [35], Shad and Lai [38].
Theoretical backing of the research
Theory of constraint and resource base view approach was adopted for the study. Goldratt [25] postulated that constraints theory is a methodology for identifying the primary limiting factor (i.e. constraint) that blocks firms from achieving a set goal. Goldratt further maintained that an organization would have to systematically continue improving the identified constraint until it ceases to be a limiting factor. This is to say that anything that limits a firm from achieving higher performance against its goal is a constraint. Some of the recognized constraints could deter effectiveness of OE staff behaviour, availability of resource, compliance issues and other risk factors, especially in the oil and gas sector. The OE management system provides a company with the benefits of lowering costs of production, improving efficiencies (cost and process), reducing a number of health and safety incidents, maximizing returns on operating assets and improving competitive advantage [9]. Bucklers’ position on constraints theory coincides with the view of [12, 20] on OE as regards oil and gas that it is about asset efficiency, reliability, personal and process safety, health and the environment. With these assertions, one could conclude that it may be the best theory to explain operational excellence in the oil and gas sector in Malaysia. It is so because theory of constraints offers a robust set of tools for helping to achieve OE in a firm because it emphasizes on the need to identify such constraints and find a way to manage them. Some of these needed tools include ERM implementation that would eventually reduce these risk elements as constraints to attaining OE.
On the other hand, resource-based view theory (RBV) was adopted to explain the independent variables of the study (regulatory framework, firm characteristics, staff capacity and information technology). The RBV is about utilizing internal resources to manage and improve organizational performance [22]. The RBV highlights the firm as a unique collection of resources [6]. According to Wernerfelt [44], RBV is the combination of valuable resources under the control of an organization, which is a central competitive gain for an organisation. By implication, the RBV would enable a firm to upgrade its operations so as to comply with regulatory requirements, the resources would enable organizations to invest in IT infrastructure and staff capacity building. Again, the RBV means that companies operations and complexity could be expanded by the resources under their control. Earlier studies on operational excellence adopted and used RBV, studies like that of Fok-Yew and Ahmad [23] and that of Shehadeh et al. [40]. The usage of the theory, though in other sectors not oil and gas, has been giving the current study the backing to adopt the same to explain operational excellence in the oil and gas sector in Malaysia.