New Avenues for Regional Innovation Systems - Theoretical Advances, Empirical Cases and Policy Lessons by Arne Isaksen Roman Martin & Michaela Trippl

Author:Arne Isaksen, Roman Martin & Michaela Trippl
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

2.2 Relatedness

The interest in new path development puts the knowledge base literature in close contact with the literature on related variety, industrial relatedness and, specifically, with the concept of regional branching. Frenken and Boschma (2007) introduced the idea of economic development as a process of diversification through evolutionary branching from the existing regional economic structure. In this perspective, diversification—or new path development—occurs through the recombination of existing technologically related industries in the region to create new industries (Boschma and Frenken 2011). The opportunities for such recombinations depend on the number of related industries present in the region, leading to an interest in measuring and analysing related variety at the regional level (Frenken et al. 2007).

Various studies have demonstrated that higher levels of related variety, due to knowledge spillovers, is conducive to regional employment growth (Frenken et al. 2007; Boschma and Iammarino 2009; Boschma et al. 2013, van Oort et al. 2015). An important question, however, is how relatedness across industries is defined, operationalised, and identified. While theoretical perspectives on relatedness between industries typically draw on the idea of cognitive proximity, i.e. similarities in the ways of thinking (Nooteboom 2000; Boschma 2005), the operationalisation of related variety has traditionally relied on the industrial classification hierarchy.

More recently, researchers started to measure revealed relatedness, which refers to observed commonalities of industries based on co-occurrence of activities, similarities in resource use, or connectedness based on trade and human capital flows (Neffke and Henning 2013; Essletzbichler 2015). When co-occurrences, similarities in the use of resources and/or higher levels of connectedness are consistent over a longer period of time, these industries, some of which might appear very different on the surface, may be assumed to rely on similar types of knowledge, skills and technologies. Contrary to measures of related variety, revealed relatedness allows relatedness across industry classes and identifies a more diverse set of related industry pairs. As highlighted by Fitjar and Timmermans (2016), these measures are also better equipped for smaller regions, where the limited number of industries cause related variety measures to underestimate relatedness.

The measures of revealed relatedness have had predictive power in several settings. First, they predict the emergence of new and the decline of incumbent industries. This process of regional branching has been empirically demonstrated on data from Sweden (Neffke et al. 2012), Spain (Boschma et al. 2013) and the United States (Essletzbichler 2015). Consequently, new path development often takes the form of path renewal (Isaksen 2015). Second, regions with higher levels of relatedness can better fend off decline; in other words, they are more resilient to economic shocks (Boschma 2015; Diodato and Weterings 2014). This resilience can be attributed to the ability of related industries to absorb the loss of jobs, as the skills of laid-off workers are valued in related industries. Third, mobility patterns between related industries allow for more efficient knowledge transfers and thus higher levels of innovative performance and productivity growth (Timmermans and Boschma 2014).

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