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Revealed Relatedness: Mapping Industry Space

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Author Info

  • Frank Neffke

    ()

  • Martin Svensson Henning

    ()

Abstract

In this paper we measure technological relatedness between industries using a dataset on product portfolios of plants. For this purpose we first develop a general methodology to extract data on co-occurrences of classes (e.g. industries) in a single entity (e.g. a plant) to construct estimates of the relatedness between the classes. The core assumption, in line with the concept of economies of scope, is that if two products are produced in the same plant, this is an indication of relatedness between the industries the two products are a part of. Unlike earlier methods, we arrive at a Revealed Relatedness (RR) index that can be interpreted on a ratio scale, allows for the use of indirect (i.e. not directly observed) information on industry relatedness, and conceptualizes relatedness as being asymmetric or directed. Direction of relatedness provides information on, for example, the most likely direction of spillovers between two classes. We also graph the RR matrices using methods borrowed from social network analysis. The result is a visualization of the “industry space” and how that changes over time with structural transformation of the economy. In order to test the validity of the framework, the industry space is used to plot structural transformation paths of regions. It is shown that the RR matrix indeed has significant explanatory power for the composition and change of a regions portfolio of manufacturing industries, in spite of the fact that regional information played no role in its derivation. This confirms the quality of our RR estimates.

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File URL: http://econ.geo.uu.nl/peeg/peeg0819.pdf
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Bibliographic Info

Paper provided by Utrecht University, Section of Economic Geography in its series Papers in Evolutionary Economic Geography (PEEG) with number 0819.

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Length: 32 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:egu:wpaper:0819

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Related research

Keywords: technological relatedness; industry relations; industry space; revealed relatedness;

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Citations

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Cited by:
  1. Ron Boschma & Martin Henning & Frank Neffke, 2009. "The impact of aging and technological relatedness on agglomeration externalities: a survival analysis," LSE Research Online Documents on Economics 33498, London School of Economics and Political Science, LSE Library.
  2. Giulio Cainelli & Donato Iacobucci, 2010. "Agglomeration, related variety and vertical integration," Working Papers 1005, c.MET-05 - Centro interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
  3. Qian Cher Li & Andrea Mina & Bruce S. Tether & Karl Wennberg, 2011. "Diversification and Human Capital as Antecedents of Internationalization amongst Professional Service Firms: A Study of UK Based Engineering Consultants," DRUID Working Papers 11-15, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  4. Frank Neffke & Martin Svensson Henning, 2009. "Skill-relatedness and firm diversification," Papers on Economics and Evolution 2009-06, Max Planck Institute of Economics, Evolutionary Economics Group, revised Oct 2010.
  5. Xavier Cirera & Anabel Marin & Ricardo Markwald, 2011. "Explaining the Diversification Path of Exporters in Brazil: How Similar and Sophisticated are New Products?," Working Paper Series 2611, Department of Economics, University of Sussex.
  6. Ron Boschma & Asier Minondo & Mikel Navarro, 2012. "The emergence of new industries at the regional level in Spain. A proximity approach based on product-relatedness," Papers in Evolutionary Economic Geography (PEEG) 1201, Utrecht University, Section of Economic Geography, revised Jan 2012.
  7. Karl-Johan Lundquist & Lars-Olof Olander, 2011. "Growth Cycles -Transformation and regional development," ERSA conference papers ersa10p918, European Regional Science Association.
  8. Ron Boschma & Rikard Eriksson & Urban Lindgren, 2013. "Labour market externalities and regional growth in Sweden: The importance of labour mobility between skill-related industries," Papers in Evolutionary Economic Geography (PEEG) 1318, Utrecht University, Section of Economic Geography, revised Oct 2013.
  9. Michael Fritsch, 2011. "The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research," Jena Economic Research Papers 2011-006, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  10. Anne Tanner, 2011. "The place of new industries: the case of fuel cell technology and its technological relatedness to regional knowledge bases," Papers in Evolutionary Economic Geography (PEEG) 1113, Utrecht University, Section of Economic Geography, revised Jul 2011.
  11. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
  12. Bram Timmermans & Ron Boschma, 2012. "The effect of intra- and inter-regional labour mobility on plant performance in Denmark: the significance of related labour inflows," Papers in Evolutionary Economic Geography (PEEG) 1213, Utrecht University, Section of Economic Geography, revised Jun 2012.
  13. Luca Andriani, 2013. "Is Acting Prosocially Beneficial for the Credit Market?," Management Working Papers 4, Birkbeck Department of Management, revised Jun 2013.
  14. Karl-Johan Lundquist & Lars-Olof Olander, 2010. "Growth cycles: transformation and regional development," SRE-Disc sre-disc-2010_04, Institute for the Environment and Regional Development, Department of Socioeconomics, Vienna University of Economics and Business.
  15. Francesca Mameli & Simona Iammarino & Ron Boschma, 2012. "Regional variety and employment growth in Italian labour market areas: services versus manufacturing industries," Papers in Evolutionary Economic Geography (PEEG) 1203, Utrecht University, Section of Economic Geography, revised Feb 2012.
  16. Jürgen Essletzbichler, 2013. "Relatedness, industrial branching and technological cohesion in U.S. metropolitan areas," Papers in Evolutionary Economic Geography (PEEG) 1307, Utrecht University, Section of Economic Geography, revised May 2013.

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