# 20.44 Do Capabilities Reside in Firms or in Regions? Analysis of Related Diversification in Chinese Knowledge Production

Yiou Zhang & David L. Rigby

pdf

Abstract:

Do capabilities reside in firms, in regions, or in both? Most models of related diversification, building on the early work of Hidalgo et al. (2007), examine how the structure of economic activity within a region conditions the trajectory of diversification. Inter-regional flows are sometimes added to these models. The logic here is that capabilities are largely built-up within regions and sometimes shared between them. We challenge that logic, exploring whether capabilities are more likely to be built within the firm and to flow across spatial boundaries than they are to be built within the region flowing across firm boundaries. Analysis focuses on Chinese patent data spanning 286 cities over the period 1991 to 2015. We develop standard models of related diversification before examining how the branches of multi-locational firms diversify their knowledge portfolios. Evidence shows that the knowledge structure of firms is more important than the knowledge structure of regions in shaping branch diversification. We show that the influence of the firm and the region on diversification vary significantly between headquarters (HQ) branches and non-HQ branches of firms, and between the non-HQ branches of firms that are located in core and peripheral cities of China.

# 20.01 Visualizing the Evolving Fit of Education and Economy: The Case of ICT Education in Norway

Marco Capasso and Michael Spjelkavik Mark

pdf

Abstract: Our study suggests a pattern of methodological steps aimed at an efficient visualization of the fit between an education and an economy. The steps help to detect cross-sectoral skills, originating in a given education path, and to connect them to the evolution of the labour market. Our procedure utilizes statistics derived from labour flows and builds upon the recent scientific literature on skill-relatedness. As an empirical application, we analyse the fit of ICT higher education with the Norwegian economy, using data on intersectoral labour flows (years 2009–2017). Our procedure is then used to analyze the Norwegian job market for ICT-educated people, suggesting the existence of cross-sectoral ICT skill-relatedness which could explain the ongoing dynamics. With the methodological steps we identify sectors linked to the “ICT-sector” as being a skill hub, but also find links to public sector, suggesting the public sector being attractive to ICT-educated people, and links to other skill-related communities containing higher education and R&D as well as data analysis and processing. Finally, the methodology identifies skill-related communities, such as finance and offshore, which are isolated, in terms of skill-relatedness, from the rest of the economy and appear to be islands in the Norwegian economy.

# 19.12 Variety, Complexity and Economic Development

Alje van Dam &, Koen Frenken

pdf

Abstract: We propose a combinatorial model of economic development. An economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products of increasingly complex products. Taking into account that economies abandon the least complex products as they develop over time, we show that variety first increases and then decreases in the course of economic development. This is consistent with the empirical pattern known as ’the hump’. Our results question the common association of variety with complexity. We further discuss the implications of our model for future research.

# 12.11 The emergence of new technology-based sectors at the regional level: a proximity-based analysis of nanotechnology

Alessandra Colombelli, Jackie Krafft, Francesco Quatraro

PDF

This paper analyzes the emergence of new technology-based sectors at the regional level. We focus on the specific case of nanotechnology as representative of an industry based on a technology still in infancy whose evolution can be reliably traced on the basis of filed patent submissions. We implement a methodological framework based on the „product-space‟ approach, which allows us to investigate whether the development of new technologies is linked to the structure of the existing local knowledge base. We use patent data over the period 1986-2006 to carry out the analysis at the NUTS 2 level over the EU 15 countries. The results of the descriptive and econometric analysis supports the idea that history matters in the spatial development of a sector, and that the technological competences accumulated at the local level are likely to shape the future patterns of technological diversification.

# 12.01 The emergence of new industries at the regional level in Spain A proximity approach based on product-relatedness

Ron Boschma and Asier Minondo and Mikel Navarro

PDF

How do regions diversify over time? Inspired by recent studies, we argue that regions diversify into industries that make use of capabilities in which regions are specialized. As the spread of capabilities occurs through mechanisms that have a strong regional bias, we expect that capabilities available at the regional level play a larger role than capabilities available at the country level for the development of new industries. To test this, we analyze the emergence of new industries in 50 Spanish regions at the NUTS 3 level in the period 1988-2008. We calculate the capability-distance between new export products and existing export products in Spanish regions, and provide econometric evidence that regions tend to diversify into new industries that use similar capabilities as existing industries in these regions. We show that proximity to the regional industrial structure plays a much larger role in the emergence of new industries in regions than proximity to the national industrial structure. This suggests that capabilities at the regional level enable the development of new industries.