Entrepreneurship Diversification, Skill Relatedness and Regional Economic Evolution
The literature in economic geography has recently shown a growing interest in the path dependent transformation of regional economies. According to evolutionary accounts, the development of regional economies can be regarded as a result of technological branching processes, where the development of the past conditions the future opportunity space of regions. In this paper, we provide a specific explanation as to why the present structure of regional economies conditions their future development. We maintain that regions are more likely to diversify into industries that are related to their existing production portfolio, than into industries that are not related. Within such a setting, entrepreneurship can be viewed as one of the main channels for regional diversification. We specifically investigate how relatedness structures and regional entrepreneurship processes interact to provide vital understanding about the mechanisms behind regional economic evolution. A novel method, â€šÃ„Ãºskill relatednessâ€šÃ„Ã¹, is used to define which industries are more related than others. The method defines relatedness between industries in terms of the extent to which the industries depend on similar human capital. We establish the skill-relatedness among different industries by investigating labor flows. This allows us to conceptualize the entire economy, manufacturing as well as services, as a network of industries that are connected to one another in terms of similarities in the human capital they use. In the empirical investigations, we use Swedish employer linked data on all 4.7 million individuals on the Swedish labor market 2004-2007. Using the skill-relatedness information and distinguishing between local diversification due to entrepreneurial activity, due to the expansion of local firms, or due to the expansion of non-local firms, we find that the probability that a new industry enters a Swedish region in any of these ways is strongly dependent on whether the industry is skill-related to many of the regionâ€šÃ„Ã´s core industries. Local economies are most likely to add industries to their portfolios that are skill-related to their industrial cores. The results suggest that skill relatedness is a fruitful tool to investigate not only the workings of regional path dependency, but also how existing skill bases are used by diversifying entrepreneurs.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward L. Glaeser, 2005. "Reinventing Boston: 1630--2003," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 119-153, April.
- Frank Neffke & Martin Henning & Martin Ron Boschma, 2009.
"How do regions diversify over time? Industry relatedness and the development of new growth paths in regions,"
Papers in Evolutionary Economic Geography (PEEG)
0916, Utrecht University, Section of Economic Geography, revised Oct 2009.
- Frank Neffke & Martin Henning & Ron Boschma, 2011. "How Do Regions Diversify over Time? Industry Relatedness and the Development of New Growth Paths in Regions," Economic Geography, Clark University, vol. 87(3), pages 237-265, 07.
- Ingram, Beth F. & Neumann, George R., 2006. "The returns to skill," Labour Economics, Elsevier, vol. 13(1), pages 35-59, February.
- Frank Neffke & Martin Svensson Henning, 2009. "Skill-relatedness and firm diversification," Papers on Economics and Evolution 2009-06, Philipps University Marburg, Department of Geography, revised Oct 2010.
- Andrea Bassanini & Giovanni Dosi, 1999. "When and How Chance and Human Will Can Twist the Arms of Clio," LEM Papers Series 1999/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Koen Frenken & Ron A. Boschma, 2007.
"A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process,"
Journal of Economic Geography,
Oxford University Press, vol. 7(5), pages 635-649, September.
- Koen Frenken & Ron A. Boschma, 2007. "A theoretical framework for Evolutionary Economic Geography: Industrial dynamics and urban growth as a branching process," Papers in Evolutionary Economic Geography (PEEG) 0701, Utrecht University, Section of Economic Geography, revised Mar 2007.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
- Ron Martin, 2010. "Roepke Lecture in Economic Geography-Rethinking Regional Path Dependence: Beyond Lock-in to Evolution," Economic Geography, Clark University, vol. 86(1), pages 1-27, 01.
- Gathmann, Christina & Schönberg, Uta, 2007.
"How General Is Human Capital? A Task-Based Approach,"
IZA Discussion Papers
3067, Institute for the Study of Labor (IZA).
- Christina Gathmann & Uta SchÃ¶nberg, 2010. "How General Is Human Capital? A Task-Based Approach," Journal of Labor Economics, University of Chicago Press, vol. 28(1), pages 1-49, 01.
- Frank Neffke & Martin Svensson Henning & Ron Boschma, 2008. "Surviving in agglomerations: Plant evolution and the changing benefits of the local environment," Papers in Evolutionary Economic Geography (PEEG) 0820, Utrecht University, Section of Economic Geography, revised Dec 2008.
- Ron Martin & Peter Sunley, 2006.
"Path Dependence and Regional Economic Evolution,"
Papers in Evolutionary Economic Geography (PEEG)
0606, Utrecht University, Section of Economic Geography, revised Mar 2006.
- Maxim Poletaev & Chris Robinson, 2008.
"Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys, 1984-2000,"
Journal of Labor Economics,
University of Chicago Press, vol. 26(3), pages 387-420, 07.
- Maxim Poletaev & Chris Robinson, 2008. "Human Capital Specificity: Evidence from the Dictionary of Occupational Titles and Displaced Worker Surveys 1984-2000," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20083, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
- David Bryce & Sidney Winter, 2006.
"A General Inter-Industry Relatedness Index,"
06-31, Center for Economic Studies, U.S. Census Bureau.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
- C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
- Koen Frenken & Frank Van Oort & Thijs Verburg, 2007. "Related Variety, Unrelated Variety and Regional Economic Growth," Regional Studies, Taylor & Francis Journals, vol. 41(5), pages 685-697.
- Paul A. David, 2007. "Path dependence: a foundational concept for historical social science," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 1(2), pages 91-114, July.
- Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
- Henderson, J. Vernon, 2003.
"Marshall's scale economies,"
Journal of Urban Economics,
Elsevier, vol. 53(1), pages 1-28, January.
- Ron A. Boschma & Rik Wenting, 2007. "The spatial evolution of the British automobile industry: Does location matter?," Industrial and Corporate Change, Oxford University Press, vol. 16(2), pages 213-238, April.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa10p937. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.