Papers in Evolutionary Economic Geography

June 16, 2017

# 17.14 Promoting regional growth and innovation: relatedness, revealed comparative advantage and the product space

Filed under: 2017 — Tags: , , , — mattehartog @ 6:43 pm

Gloria Cicerone, Philip McCann, Viktor A. Venhorst

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We adapt the product-space methodological approach of Hausmann and Klinger to the case of Italian provinces and regions in order to examine the extent to which the network connectedness and centrality of a province’s exports is related to its economic performance. We construct a new Product Space Position (PSP) index which retains many of the Hausmann-Klinger features but which is also much better suited to handling regional and provincial data. We also compare PSP performance with two other export composition indices. A better positioning in the export-network product space is indeed associated with a better local economic outcomes.

June 1, 2017

# 17.10 Local Discoveries and Technological Relatedness: the Role of Foreign Firms

Filed under: 2017 — Tags: , , , , — mattehartog @ 5:07 pm

Alessia Lo Turco and Daniela Maggioni

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We explore the role of local intra and extra-regional product-specific capabilities in foster ing the introduction of new products by firms active in the Turkish manufacturing sector. We model firms’ product additions to their product basket as dependent on extra and intra-regional knowledge. We find that regional “discoveries”, that is newly introduced products never produced before in the region, are positively and significantly affected by external related knowledge spurring from foreign firms active in the same location as well as by firm internal capabilities. Technologically related intra-regional knowledge spillovers and extra-regional knowledge spilling from imported inputs do not play a relevant role. The former, however, matter when we extend the analysis to all new products introduced by firms, regardless of their previous presence in the regional production basket. We interpret this evidence as foreign affiliates bringing new and exclusive capabilities which are missing in the region where they locate, thus providing a stimulus for regional production diversification and upgrading. This hypothesis is validated by exploring the heterogeneous role of the different intra and extra-regional knowledge sources according to products’ complexity.

April 5, 2016

# 16.06 Inter-industry labor flows

Filed under: 2016 — Tags: , , , , , — mattehartog @ 1:31 am

Frank Neffke, Anne Otto, Antje Weyh

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Labor flows across industries reallocate resources and diffuse knowledge among economic activities. However, surprisingly little is known about the structure of such inter-industry flows. How freely do workers switch jobs among industries? Between which pairs of industries do we observe such switches? Do different types of workers have different transition matrices? Do these matrices change over time? Using German social security data, we generate stylized facts about inter-industry labor mobility and explore its consequences. We find that workers switch industries along tight paths that link industries in a sparse network. This labor-flow network is relatively stable over time, similar for workers in different occupations and wage categories and independent of whether workers move locally or over larger distances. When using these networks to construct inter-industry relatedness measures they prove better predictors of local industry growth rates than co-location or input-based alternatives. However, because industries that exchange much labor typically do not have correlated growth paths, the sparseness of the labor-flow network does not necessarily prevent a smooth reallocation of workers from shrinking to growing industries. To facilitate future research, the inter-industry relatedness matrices we develop are made available as an online appendix to this paper.

September 8, 2015

# 15.29 Technological Relatedness and Firm Productivity: Do low and high performing firms benefit equally from agglomeration economies in China?

Filed under: 2015 — Tags: , , , — mattehartog @ 3:44 pm

Anthony J. Howell, Canfei He, Rudai Yang, Cindy Fan

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Building on the evolutionary economic geography literature, we employ the density measure introduced by ? to dynamically track the impact of technological relatedness on firm productivity. We rely on advanced quantile regression techniques to determine whether technological relatedness stimulates productivity and whether the size of the effect varies for low and high performing firms. Lastly, taking China’s economic transition into account, we test whether changes in the local industrial mix brought about by China’s market reforms enable or inhibit performance-enhancing spillovers. We show that a dynamic tradeoff exists between agglomeration costs and benefits that depends, in part, on the firm’s placement along the productivity distribution: the effect of technological relatedness reduces productivity for the least performing firms, but enhances it for better performing firms. As a result, spillovers via technological relatedness lead to improvements in the geographical welfare by intensifying the learning effect for the vast majority of co-located firms, in spite of increasing productivity disparities between the bottom and top performing firms.

# 15.27 Firm Dynamics and Regional Inequality of Productivity in China

Canfei He, Yi Zhou

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Industrial change processes are underlying forces that determine the change of regional productivity. In developed market economies, less productive firms are more likely to exit while productive firms have more chance to enter and to survive. As a result, spatial inequality of firm dynamics will directly influence the inequality of regional productivity. This study investigates how firm dynamics would affect regional productivity using firm level data during 1998-2007 in China. We first estimate total factor productivity (TFP) for each firm based on the semi-parametric method proposed by Olley and Pakes (1996). Regional productivity is derived by weighing the firm TFP using gross industrial output. There is considerable spatial inequality of TFP paired with a trend of convergence over the time period of 1999-2007. Decomposition of TFP growth shows that firm entry, exit and survival do contribute to TFP change and their contributions vary across prefectures substantially. The between share holds the largest regional difference, as the most important factor contributing to the spatial inequality of regional TFP. The restructuring of SOEs has critically contributed to the spatial inequality of TFP by raising TFP in the traditional industrial bases and by facilitating the development of productive private and foreign sectors particularly in the coastal region. The finding indicates that resource reallocation across firms with different ownerships is the key mechanism to improve regional productivity.

August 28, 2015

# 15.25 Smart Specialization Strategies and Key Enabling Technologies. Regional evidence from European patent data.

Sandro Montresor and Francesco Quatraro

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The paper investigates the drivers of Smart Specialisation Strategies (S3) with a focus on Key Enabling Technologies (KETs). We re-examine the interpretation of S3 as new regional technological advantages (RTAs) obtained through relatedness, by reconceptualising within it the original focus on General Purpose Technologies (GPTs) and by considering their inter-regional spillovers. Combing regional patent and economic data for a 30-year panel (1980-2010) of 26 European countries, we find that KETs positively impact on new RTAs, pointing to a novel “enabling” role for them. KETs also negatively moderate the RTAs-impact of cognitively proximate pre-existing technologies, suggesting that KETs could make relatedness less binding in pursuing S3. The net-impact of KETs is positive, pointing to a new case for plugging KETs in the S3 policy tool-box. Furthermore, KETs also display cross-regional spillovers in their RTAs-impact, leaving KETs “poor” regions with a possible back-up from closer KETs “rich” ones.

May 13, 2015

# 15.12 Knowledge flows in high-impact firms: How does relatedness influence survival, acquisition and exit?

Filed under: 2015 — Tags: , , , — mattehartog @ 6:38 pm

Jonathan Borggren, Rikard H. Eriksson & Urban Lindgren

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Following the impact on regional renewal and employment ascribed to rapidly growing firms (high-impact firms, HIFs), this paper argues that little is still known in economic geography and business studies today regarding the mechanisms influencing growth of such firms and, hence, the potential impact on regional employment. The aim of this paper is thus to explore how the qualitative content of skills (i.e. the degree of similarity, relatedness and unrelatedness) recruited to a firm during a period of fast growth influences its future success. Our findings, based on a sample of 1,589 HIFs in the Swedish economy, suggest that it is not only the number of people employed that matters in aiding the understanding of the future destiny of the firms –”but also, more importantly, it is the scope of the skills recruited and their proximity to related industries.

October 27, 2014

# 14.21 Institutions and Diversification: Related versus Unrelated Diversification in a Varieties of Capitalism framework

Ron Boschma and Gianluca Capone

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The Varieties of Capitalism literature has drawn little attention to industrial renewal and diversification, while the related diversification literature has neglected the institutional dimension of industrial change. Bringing together both literatures, the paper proposes that institutions have an impact on the direction of the diversification process, in particular on whether countries gain a comparative advantage in new sectors that are close or far from what is already part of their existing industrial structure. We investigate the diversification process in 23 developed countries by means of detailed product trade data in the period 1995-2010. Our results show that relatedness is a stronger driver of diversification into new products in coordinated market economies, while liberal market economies show a higher probability to move in more unrelated industries: their overarching institutional framework gives countries more freedom to make a jump in their industrial evolution. In particular, we found that the role of relatedness as driver of diversification into new sectors is stronger in the presence of institutions that focus more on ‘non-market’ coordination in the domains of labor relations, corporate governance relations, product market relations, and inter-firm relations.

June 3, 2014

# 14.13 Relatedness in eco-technological development in European regions

Filed under: 2014 — Tags: , , , , — mattehartog @ 11:02 am

Martijn van den Berge and  Anet Weterings

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Within the smart specialisation programme, the European Commission urges regional policy-makers to assess their regional innovation potential and consider investing in the areas of eco-technologies taking into account the regions’ specific strengths and weaknesses. In evolutionary economic geography, several studies have shown that regional innovation is a path dependent process whereby new technologies develop out of the existing regional knowledge base. In this paper, we examine to what extent this is also the case for eco-innovation; if so, the existing technological structure of a region would be an important source of information for regional policymakers with respect to designing their eco-innovation policy agenda. Our results show that in EU-regions both the probability of developing eco-innovations and the number of patents in this field depends on the patents that have been developed in related fields in the region in prior years.

April 9, 2014

# 14.10 Agents of structural change. The role of firms and entrepreneurs in regional diversification

Filed under: 2014 — Tags: , , , , , — mattehartog @ 3:58 pm

Frank Neffke, Matté Hartog, Ron Boschma, Martin Henning

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Who introduces structural change in regional economies: Entrepreneurs or existing firms? And do local or non-local firms and entrepreneurs create most novelty in a region? Using matched employer-employee data for the whole Swedish workforce, we determine how unrelated and therefore how novel the activities of different establishments are to a region’s industry mix. Up- and downsizing establishments cause large shifts in the local industry structure, but these shifts only occasionally require an expansion of local capabilities because the new activities are often related to existing local activities. Indeed, these incumbents tend to align their production with the local economy, deepening the region’s specialization. In contrast, structural change mostly originates via new establishments, especially those with non-local roots. Moreover, although entrepreneurs start businesses more often in activities unrelated to the existing regional economy, new establishments founded by existing firms survive in such activities more often, inducing longer-lasting changes in the region.

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