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  • 1.
    Xiao, Jing
    et al.
    Lund Univ, SWE.
    Boschma, Ron
    Univ Utrecht, NLD.
    Andersson, Martin
    Blekinge Institute of Technology, Faculty of Engineering, Department of Industrial Economics.
    Industrial Diversification in Europe: The Differentiated Role of Relatedness2018In: Economic Geography, ISSN 0013-0095, E-ISSN 1944-8287, Vol. 94, no 5, p. 514-549Article in journal (Refereed)
    Abstract [en]

    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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