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Industrial Diversification in Europe : The Differentiated Role of Relatedness

Xiao, Jing LU ; Boschma, Ron LU and Andersson, Martin LU (2018) In Economic Geography p.1-36
Abstract

There is increasing interest in the drivers of industrial diversification, and how these depend on economic and industry structures. This article contributes to this line of inquiry by analyzing the role of industry relatedness in explaining variations in industry diversification, measured as the entry of new industry specializations, across 173 European regions during the period 2004–2012. First, we show that there are significant differences across regions in Europe in terms of industrial diversification. Second, we provide robust evidence showing that the probability that a new industry specialization develops in a region is positively associated with the new industry’s relatedness to the region’s current industries. Third, a novel... (More)

There is increasing interest in the drivers of industrial diversification, and how these depend on economic and industry structures. This article contributes to this line of inquiry by analyzing the role of industry relatedness in explaining variations in industry diversification, measured as the entry of new industry specializations, across 173 European regions during the period 2004–2012. First, we show that there are significant differences across regions in Europe in terms of industrial diversification. Second, we provide robust evidence showing that the probability that a new industry specialization develops in a region is positively associated with the new industry’s relatedness to the region’s current industries. Third, a novel finding is that the influence of relatedness on the probability of new industrial specializations depends on innovation capacity of a region. We find that relatedness is a more important driver of diversification in regions with a weaker innovation capacity. The effect of relatedness appears to decrease monotonically as the innovation capacity of a regional economy increases. This is consistent with the argument that high innovation capacity allows an economy to break from its past and to develop, for the economy, truly new industry specializations. We infer from this that innovation capacity is a critical factor for economic resilience and diversification capacity.

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author
organization
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type
Contribution to journal
publication status
epub
subject
in
Economic Geography
pages
36 pages
publisher
Economic Geography
external identifiers
  • scopus:85046489579
ISSN
0013-0095
DOI
10.1080/00130095.2018.1444989
language
English
LU publication?
yes
id
97d7ef88-bc41-40e7-b50c-6e4f2ec6a142
date added to LUP
2018-05-15 13:25:58
date last changed
2018-10-03 11:26:32
@article{97d7ef88-bc41-40e7-b50c-6e4f2ec6a142,
  abstract     = {<p>There is increasing interest in the drivers of industrial diversification, and how these depend on economic and industry structures. This article contributes to this line of inquiry by analyzing the role of industry relatedness in explaining variations in industry diversification, measured as the entry of new industry specializations, across 173 European regions during the period 2004–2012. First, we show that there are significant differences across regions in Europe in terms of industrial diversification. Second, we provide robust evidence showing that the probability that a new industry specialization develops in a region is positively associated with the new industry’s relatedness to the region’s current industries. Third, a novel finding is that the influence of relatedness on the probability of new industrial specializations depends on innovation capacity of a region. We find that relatedness is a more important driver of diversification in regions with a weaker innovation capacity. The effect of relatedness appears to decrease monotonically as the innovation capacity of a regional economy increases. This is consistent with the argument that high innovation capacity allows an economy to break from its past and to develop, for the economy, truly new industry specializations. We infer from this that innovation capacity is a critical factor for economic resilience and diversification capacity.</p>},
  author       = {Xiao, Jing and Boschma, Ron and Andersson, Martin},
  issn         = {0013-0095},
  language     = {eng},
  month        = {05},
  pages        = {1--36},
  publisher    = {Economic Geography},
  series       = {Economic Geography},
  title        = {Industrial Diversification in Europe : The Differentiated Role of Relatedness},
  url          = {http://dx.doi.org/10.1080/00130095.2018.1444989},
  year         = {2018},
}