Papers in Evolutionary Economic Geography

January 18, 2018

# 18.07 Shooting Low or High: Do Countries Benefit from Entering Unrelated Activities?

Flávio L. Pinheiro & Aamena Alshamsi & Dominik Hartmann & Ron Boschma & César Hidalgo

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It is well known that countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter relatively more unrelated products. We analyze the economic diversification paths of 93 countries between 1970 and 2010 and find that countries enter unrelated products in only about 7.2% of all observations. Then, we show that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience an increase in short-term economic growth of 0.5% per annum compared to those with similar levels of income, human capital, capital stock per worker, and economic complexity.

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# 18.06 The subsidiarity principle: Turning challenge-oriented innovation policy on its head

Filed under: 2018 — Tags: , , , , — Noegg Blogger @ 12:18 pm

Iris Wanzenböck & Koen Frenken

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While innovation policy started as national policy, we witness a proliferation both at the sub-national and the supra-national level. This begs the question about subsidiarity: what policies should be organized at sub-national, national and supra-national levels? We argue that innovation policies aimed to solve societal challenges such as climate change or aging – currently central in EU policies – are better organized at sub-national levels given the contested nature of problem identification and the contextual nature of problem-solving. Regional innovation policy, then, should formulate concrete societal goals relevant to the local community and tailored to the local context.

January 11, 2018

# 18.02 Multinational enterprises, industrial relatedness and employment in European regions

Filed under: 2018 — Tags: , , , , — Noegg Blogger @ 11:49 am

Nicola Cortinovis and Riccardo Crescenzi and Frank van Oort

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This paper looks at the link between Multinational Enterprises (MNEs) and employment in local firms in their host regions. The paper cross-fertilizes the literature on MNE spillovers with the emerging body of research on industrial relatedness. This paper empirically tests the link between industrial relatedness and MNE impacts on employment by capturing various types of horizontal and vertical similarities across industries. The focus of our study is on employment in European NUTS2 regions. The empirical analysis shows that cross-sectoral MNE spillovers among cognitively related industries are positive and significant, confirming that industrial relatedness is an important driver of employment-enhancing spillovers from MNE activities. However, positive effects of MNEs on domestic employment are contingent upon the modeling of both regional and industrial heterogeneity.

January 8, 2018

# 18.04 Social capital, resilience and regional diversification in Italy

Roberto Antonietti and Ron Boschma

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There is increasing interest in the question how institutions affect regional diversification, especially in times of economic crisis. This paper investigates the role of social capital for the entry of new industries and the exits of existing industries in Italian provinces during the 2004-2010 period. Our results show that bridging social capital in a region positively contributes to the entry of new industries, especially when they are unrelated to existing specializations in the region. Diversification in regions (especially more unrelated diversification) tends to rely on bridging, not on bonding social capital. We also find that bridging social capital loses its impact on regional diversification during the crisis. Bonding, not bridging social capital, appears to make regions resilient in times of crisis, by reducing the probability of exit, especially in industries unrelated to existing specializations in regions. While bridging social capital has a negative effect on exit in times of prosperity, it shows no such effect anymore during the crisis period. Our findings suggest that bridging social capital loses its supportive role in times of crisis.

January 6, 2018

# 18.03 Change in urban concentration and economic growth

Filed under: 2018 — Tags: , , , , — Noegg Blogger @ 9:05 pm

Susanne A. Frick and Andrés Rodríguez-Pose

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The paper investigates (1) the evolution of urban concentration from 1985 to 2010 in 68 countries around the world and (2) the extent to which the degree of urban concentration affects national economic growth. It aims to overcome the limitations of existing empirical literature by building a new urban population dataset that allows the construction of a set of Herfindahl-Hirschman-Indices which capture a country’s urban structure in a more nuanced way than the indicators used hitherto. We find that, contrary to the general perception, urban concentration levels have on average decreased or remained stable (depending on indicator). However, these averages camouflage diverging trends across countries. The results of the econometric analysis suggest that there is no uniform relationship between urban concentration and economic growth. Urban concentration is beneficial for economic growth in high-income countries, while this effect does not hold for developing countries. The results differ from previous analyses that generally underscore the benefits of urban concentration at low levels of economic development. The results are robust to accounting for reverse causality through IV analysis, using exogenous geographic factors as instruments.

# 18.05 The revenge of the places that don’t matter (and what to do about it)

Filed under: 2018 — Tags: , , , , , — Noegg Blogger @ 8:46 pm

Andrés Rodríguez-Pose

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Persistent poverty, economic decay, and lack of opportunities are at the root of considerable discontent in declining and lagging-behind areas the world over. Poor development prospects and an increasing belief that these places have ‘no future’ – as economic dynamism has been posited to be increasingly dependent on agglomeration economies – have led many of these so-called ‘places that don’t matter’ to revolt against the status quo. The revolt has come via an unexpected source: the ballot-box in a wave of political populism with strong territorial, rather than social foundations. I will argue that the populist wave is challenging the sources of existing well-being in both the less-dynamic and the more prosperous areas and that better, rather than more, place-sensitive territorial development policies are needed in order to find a solution to the problem. Place-sensitive development policies need, however, to stay clear of the welfare, income-support, and big investment projects of past development strategies if they are to be successful and focus on tapping into untapped potential and on providing opportunities to those people living in the places that ‘don’t matter’.

# 18.01 Biotech by Bricolage? Agency, institutional relatedness and new path development in peripheral regions

Filed under: 2018 — Tags: , , , , , — Noegg Blogger @ 8:30 pm

Luís Carvalho & Mário Vale

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This paper develops a framework to understand new industrial path development in peripheral regions based on notions of ‘bricolage’ and ‘institutional relatedness’. While the first stresses the agency of (heterogeneous) actors’ resourcefulness and strategic improvisation co-shaping new industrial paths, the latter highlights the transposition of related institutional settings within regions to amplify (or to limit) the search space for new industries. These arguments are used in conjunction to explain the development of an unlikely biotechnology path in the Portuguese Centro region, analysed since its emergence and over a period of more than ten years.

December 30, 2017

# 17.32 Why do firms collaborate with local universities?

Filed under: 2017 — Tags: , , , — mattehartog @ 11:01 am

Rune Dahl Fitjar, Martin Gjelsvik

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This paper examines why firms sometimes collaborate locally rather than with higher-quality universities at a distance. Existing research has mostly relied on the localised knowledge spillover, or LKS, model to explain this. This model holds that knowledge transfer across distance is costly, and collaborating locally reduces the risk of information loss when the knowledge is transferred. However, there are various other reasons that could also explain the pattern. If the local university can make a useful contribution, firms might choose to look no further. Firms may also see collaboration as a long-term investment, helping to build up research quality at the local university with the hope of benefiting in the future. Finally, firms may want to contribute to the local community. We extend the LKS model with these additional motivations and explore their validity using data from 23 semi-structured interviews of firms that collaborate intensively with lower-tier local universities.

December 19, 2017

# 17.31 Labour mobility, skill-relatedness and plant survival over the industry life cycle: Evidence from new Dutch plants

Filed under: 2017 — Tags: , , , , — mattehartog @ 7:22 am

Ron Boschma, Riccardo Cappelli, Anet Weterings

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Labour mobility is often considered a crucial factor for regional development. However, labour mobility is not good per se for local firms. There is increasing evidence that labour recruited from skill-related industries has a positive effect on plant performance, in contrast to intra-industry labour recruits. However, little is known about which types of labour are recruited in different stages of the evolution of an industry, and whether that matters for plant performance. This paper attempts to fill these gaps in the literature using plant-level data for manufacturing and services industries in the Netherlands for the period 2001-2009. Our study focuses on the effects of different types of labour recruits on the survival of new plants. We show that the effects of labour recruits from the same industry and from skill-related and unrelated industries on plant survival vary between the life cycle stages of industries. We also find that inter-regional labour flows do not impact on plant survival.

# 17.30 The core in the periphery? The cluster organisation as the central node in the Apulian aerospace district

Giuseppe Calignano, Rune Dahl Fitjar, Dieter Franz Kogler

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Cluster policy is often ineffective in peripheral regions with weak institutions and significant barriers to knowledge production and exchange. Nonetheless, many peripheral regions have pursued such policies in recent years, an example being technology districts in Southern Italy. This paper examines one such district, the aerospace district in Apulia, where policy has focused on indirect support for networking through coordination. This has led to a substantial increase in knowledge exchange within the district, but also to a heavy dependence on the cluster organization itself as the key actor in the knowledge exchange network.

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