This note studies the mechanisms through which regional economies diversify over time and formulates suggestions on how policy can influence such process. In particular, two closely related concepts will be defined, that is, technological relatedness and related variety.
Regional diversification is a crucial process in order to develop new growth paths. It is understood as an emerging process through which new activities develop out of existing ones, but the scope and outcome of this process are fundamentally affected by technological and cognitive constraints.
We discuss how technological relatedness may provide an input for effective policy making. In this respect, public policy should avoid picking winners that do not fit into the regional actual and potential industrial space and should prevent supporting declining industries that occupy a peripheral position in the industry space of a region. More in particular, we direct attention to various mechanisms through which new industries may be stimulated to connect to technologically related industries at the regional level.
We also introduce the process of entrepreneurial discovery, in which entrepreneurs generate the key information guiding the selection of the domains of future regional specialization, and discuss its relationship with policy schemes based on related diversification.
BOSCHMA Ron;
GIANELLE Carlo;
2014-05-15
Publications Office of the European Union
JRC88242
978-92-79-69684-8 (print),
978-92-79-35503-5,
1018-5593 (print),
1831-9424 (online),
EUR 26521 EN,
OP LF-NA-26521-EN-C (print),
OP LF-NA-26521-EN-N (online),
http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=7245,
https://publications.jrc.ec.europa.eu/repository/handle/JRC88242,
10.2791/039340 (print),
10.2791/65062 (online),
