This study examines the role of capabilities in enabling incumbent firms to engage in distant search, challenging the prevailing view that such exploration is primarily determined by incentives. Drawing on the U.S. onshore oil exploration industry, we analyze data from over 25,000 firms and nearly a million lease contracts from 2008 to 2018. We compare the success rate in distant search for two types of firms: (1) wildcatters - those that predominantly engage in distant search (search in areas where oil has not been discovered before), and (2) non-wildcatters - those that predominantly engage in local search (search in areas where oil has been found before). We find that wildcatters are more successful in discovering oil compared to non-wildcatters, even when controlling for incentives. Our analysis identifies two key mechanisms underpinning distant search capabilities: the use of trade secrets, such as undisclosed chemical ingredients in fracking, and accumulated experience with wildcat drilling. Using matching methodologies and instrumental variable techniques, we provide robust evidence that these capabilities significantly reduce the likelihood of failure in distant search. By highlighting the critical role of capabilities, this study contributes to the literature on organizational search and offers insights for fostering innovation in uncertain environments.
