We challenge the currently dominating static view of inter‐industry relatedness by investigating the evolution of relatedness linkages between Swedish industries during five sub‐periods between 1991 and 2010. Distinguishing between stable ties (present in all sub‐periods) and non‐stable ties (e.g. emerging, disappearing, etc.), we demonstrate that inter‐industry relatedness linkages change considerably over time. Furthermore, we show that these changes matter for how the co‐location of related industries (related variety) influences regional employment growth – to generate growth the type of local related ties should match with the regional setting. We suggest that, at least partly, the impact of emerging, stable and disappearing ties differs since complementarity potential between related industries becomes depleted over time. In other words, relatedness linkages have a ‘best before date’.
The benefits of related variety on regional employment growth have become a prevailing view. However, these remain potential benefits unless channels (e.g. labour flows, inter-firm cooperation) and regional capabilities are in place to convert them into actual growth. This paper focuses on the labour mobility channel and proposes a way to measure the realized part of related variety. It demonstrates that in Sweden, core regions make ten times more use of their related variety potential via labour mobility than small, peripheral regions. Moreover, even in core and large regions only a handful of potential ties are realized. Most firms in small regions must rely on other channels to convert related variety potential into growth. Furthermore, while local labour flows between related industries are associated with higher employment growth, no evidence is found that, on average, other channels bring growth benefits in small regions. Thus, the paper argues that the role of market-mediated knowledge flow channels like labour mobility is underestimated compared to pure spillovers via unintended interactions. Consequently, it is important to go beyond assuming that the benefits of related variety are 'in the air' or in local 'buzz' and focus on specific channels at work.
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