# 18.34 What kind of related variety for long-term regional growth?

Kadri Kuusk & Mikhail Martynovich

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Abstract: We investigate the evolution of relatedness linkages between Swedish industries during five sub-periods between 1991 and 2010. Distinguishing between the stable ties (present in all sub- periods) and non-stable ties (emerging, disappearing, etc), we demonstrate that the relatedness linkages change considerably over time. Furthermore, we show that the changes in the relatedness matrix matter for the impact of related variety on regional employment growth. We argue, therefore, that the relatedness linkages have a ‘best before date’ and that the choice of what relatedness indicator to apply and how deserves more consideration than it is usually given.

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# 18.33 An Evolutionary Perspective on the British Banking Crisis

Neill Marshall & Stuart Dawley & Andy Pike & Jane Pollard & Mike Coombes

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Abstract: Developing an evolutionary perspective towards the changing anatomy of the banking sector reveals the enduring tensions and contradictions between spatial centralisation and the possibilities for decentralisation before, during and after the British banking crisis. The shift from banking boom to crisis in 2007 is conceptualised as a significant and on-going moment in the long-term evolution of the historical institutional-spatial dominance of London over other city-regions in Britain. The analysis demonstrates the importance of the institutional and geographical legacies of the British national political economy and variegation of capitalism established in the later nineteenth and early twentieth centuries in shaping contemporary geographical outcomes. Regulatory changes combined with financial innovation in the latter years of the twentieth century to create an opportunity for English regional and Scottish banks excluded from previous institutional-spatial centralisation to expand excessively and consequently several failed in the banking crisis. The paper considers the future trajectory of institutional-spatial centralisation in the banking sector amidst the continued spatial restructuring of the banking crisis, involving a re-drawing of organisational boundaries, overlapping institutional and technological changes and unprecedented uncertainty about the impact of Brexit on Britain’s wider political and economic landscape.

# 18.32 Ageing labour: How does demographic change affect regional human capital?

Paula Prenzel & Simona Iammarino

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Abstract: Human capital investments are frequently suggested as policy measure to cope with smaller and older labour forces caused by demographic change across Europe. However, the availability and composition of human capital is fundamentally intertwined with demographic structures, especially at a regional level. This paper analyses how ageing is related to the regional composition of human capital for 332 German regions between 1996 and 2010. The findings show that labour force ageing is associated with lower educational attainment, and that older labour forces have higher shares of traditional vocational degrees. On a national level, education expansion still sufficiently compensates for the effects of population ageing, but regional human capital composition shows distinct trends.

# 18.31 Unemployment resistance across EU regions: the role of technological and human capital

Riccardo Cappelli & Fabio Montobbio & Andrea Morrison

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Abstract: We investigate the impact of the 2008 crisis to study the relationship between economic and technological resilience in 248 European Union regions. For economic resilience we measure the difference between the level of unemployment rate before crisis and the level of unemployment rate at its peak after the crisis – i.e., the unemployment resistance. Using European Patent Office patents, we look at all technological crises in each region since 1978 and build a variable of technological resilience measuring the historical ability of a region to maintain its level of knowledge creation in face of adverse shocks – i.e., the technological resistance. We find that technological resistance is a good predictor of economic resistance. In particular, our results show that (1) important interaction effects exist between technological resistance and human capital, (2) technological resistance and the level of human capital are less effective in protecting female and elder adult workers in an economic crisis and (3) important country level effects are present.

# 18.30 The Principle of Relatedness

César A. Hidalgo & Pierre-Alexandre Balland & Ron Boschma & Mercedes Delgado & Maryann Feldman & Koen Frenken & Edward Glaeser & Canfei He & Dieter F. Kogler & Andrea Morrison & Frank Neffke & David Rigby & Scott Stern & Siqi Zheng & Shengjun Zhu

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Abstract: The idea that skills, technology, and knowledge, are spatially concentrated, has a long academic tradition. Yet, only recently this hypothesis has been empirically formalized and corroborated at multiple spatial scales, for different economic activities, and for a diversity of institutional regimes. The new synthesis is an empirical principle describing the probability that a region enters – or exits – an economic activity as a function of the number of related activities present in that location. In this paper we summarize some of the recent empirical evidence that has generalized the principle of relatedness to a fact describing the entry and exit of products, industries, occupations, and technologies, at the national, regional, and metropolitan scales. We conclude by describing some of the policy implications and future avenues of research implied by this robust empirical principle

# 18.29 Complex Economic Activities Concentrate in Large Cities

Pierre-Alexandre Balland & Cristian Jara-Figueroa & Sergio Petralia & Mathieu Steijn & David Rigby & César A. Hidalgo

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Abstract: Why do some economic activities agglomerate more than others? And, why does the agglomeration of some economic activities continue to increase despite recent developments in communication and transportation technologies? In this paper, we present evidence that complex economic activities concentrate more in large cities. We find this to be true for technologies, scientific publications, industries, and occupations. Using historical patent data, we show that the urban concentration of complex economic activities has been continuously increasing since 1850. These findings suggest that the increasing urban concentration of jobs and innovation might be a consequence of the growing complexity of the economy.

# 18.28 The role of industry, occupation, and location specific knowledge in the survival of new firms

Cristian Jara-Figueroa & Bogang Jun & Edward Glaeser & Cesar Hidalgo

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Abstract: How do regions acquire the knowledge they need to diversify their economic activities? How does the migration of workers among firms and industries contribute to the diffusion of that knowledge? Here we measure the industry, occupation, and location specific knowledge carried by workers from one establishment to the next using a dataset summarizing the individual work history for an entire country. We study pioneer firms–firms operating in an industry that was not present in a region–because the success of pioneers is the basic unit of regional economic diversification. We find that the growth and survival of pioneers increase significantly when their first hires are workers with experience in a related industry, and with work experience in the same location, but not with past experience in a related occupation. We compare these results with new firms that are not pioneers and find that industry specific knowledge is significantly more important for pioneer than non-pioneer firms. To address endogeneity we use Bartik instruments, which leverage national fluctuations in the demand for an activity as shocks for local labor supply. The instrumental variable estimates support the finding that industry related knowledge is a predictor of the survival and growth of pioneer firms. These findings expand our understanding of the micro-mechanisms underlying regional economic diversification events.

# 18.27 Innovating in less developed regions: what drives patenting in the lagging regions of Europe and North America

Andrés Rodríguez-Pose & Callum Wilkie

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Abstract: Not all economically-disadvantaged – ‘less developed’ or ‘lagging’ – regions are the same. They are, however, often bundled together for the purposes of innovation policy design and implementation. This paper attempts to determine whether such bundling is warranted by conducting a regional level investigation for Canada, the United States, on the one hand, and Europe, on the other, to (a) identify the structural and socioeconomic factors that drive patenting in the less developed regions of North America and Europe, respectively; and (b) explore how these factors differ between the two contexts. The empirical analysis, estimated using a mixed- model approach, reveals that, while there are similarities between the drivers of innovation in North America’s and Europe’s lagging regions, a number of important differences between the two continents prevail. The analysis also indicates that the territorial processes of innovation in North America’s and Europe’s less developed regions are more similar to those of their more developed counterparts than to one another.

# 18.26 Strategies of gain and strategies of waste: What determines the success of development intervention?

Andrés Rodríguez-Pose & Callum Wilkie

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Abstract: The development policy landscape has, in recent years, been dominated by four types of interventions: (1) infrastructure expansion and development; (2) the attraction of inward investment; (3) the promotion of innovation and development of human capital; (4) the cultivation of agglomeration and physical co-location. This paper engages with these four broad policy types with a view to, first, assess and comment on the utility of these approaches in different development contexts, and, second, provide an indication of what has worked and what has not worked in the design and implementation of these strategic actions. It relies on a review of a handful of ‘strategies of gain’ and ‘strategies of waste’ to ascertain insights into the steps that should be taken to maximise the likelihood that territorial development policies – irrespective of the development axis towards which they are oriented – fulfil their potential and contribute to the reduction of the territorial disparities in developed and developing contexts alike. The lessons drawn from this review are four-fold: i) development strategies composed of multiple related and mutually-reinforcing actions and interventions across development areas deliver better results; ii) strategic approaches to the promotion of economic growth that are solidly grounded in robust diagnoses are generally more successful; iii) the awareness of where exactly the territory is situated on the development spectrum is crucial; and iv) the institutional dimension cannot be left un-addressed in the design and implementation of policy interventions. These lessons are supplemented by a general framework relating to how territorial approaches to development should be designed for areas at different points in their development trajectories.

# 18.25 Rethinking Path Creation: A Geographical Political Economy Approach

Danny Mackinnon & Stuart Dawley & Andy Pike & Andrew Cumbers

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Abstract: A burgeoning strand of Evolutionary Economic Geography (EEG) research is addressing questions of regional path creation, based upon the idea that place-specific legacies and conditions play a critical role in supporting the emergence of new economic activities. Yet there has been little effort thus far to take stock of this emerging body of research. In response, the aims of this paper are to offer a fresh synthesis of recent work and to develop a broader theoretical framework to inform future research. First, it presents a critical appraisal of the state of the art in path creation research. In an effort to address identified gaps in EEG research, this incorporates insights from sociological perspectives, the global production networks (GPN) approach and transition studies. Second, the paper’s development of a systematic theoretical framework is based upon the identification of key dimensions of path creation and their constitutive inter-relations. This contribution is underpinned by a geographical political economy (GPE) approach which provides the ontological basis for the integration of the five key dimensions of path creation within an overarching framework and the positioning of regional processes in relation to the broader dynamics of uneven development. Informed by GPE, the argument is that knowledgeable actors, operating within multi-scalar institutional environments, create paths through the strategic coupling of regional and extra-regional assets to mechanisms of path creation and associated markets. To inform further research, the paper outlines four concrete propositions regarding the operation of path creation processes in different types of regions and explores these through case studies of Berlin and Pittsburgh.