Explaining regional economic performance: the role of competitiveness, specialization and capabilities

How should differences in regional economic performance be explained? This chapter examines the different approaches to this question, including their empirical underpinnings, which have developed in the scholarly literature, with particular emphasis on identifying issues that continue to be of central importance for scholars in the field today. It is noted, however, that as far as theories and perspectives are concerned, the research area under scrutiny here is a highly porous one. In fact, the theoretical perspectives guiding researchers in this area usually apply to other spatial levels as well. For this reason, a very sharp distinction between the bodies of knowledge on, for instance, national and regional economic performance may not be very fruitful. The chapter presents an overview of how theoretical and applied work of relevance for the analysis of regional economic performance has evolved to its present stance. This leads to the identification of two central factors for regional economic performance, that is, capability building and specialization. Issues concerned with the availability of relevant data for exploring the relationships between these factors and economic development are then considered. The analysis shows that regional economic performance and capability building does indeed go hand in hand, while the evidence regarding the impact of specialization is more mixed. The chapter then concludes by considering lessons and implications for policy and future research.