Related variety and economic development: a literature review

Abstract

Since the introduction of the related variety concept in 2007, a number of studies have been undertaken to analyse its effect on economic development. Our review of 21 studies makes clear that most studies find support for the initial hypothesis that related variety supports employment growth, though some studies suggest that the growth effects of related variety may be specific to knowledge-intensive sectors only. From the review, we list a number of further research questions regarding methodology, the role of unrelated variety, different forms of relatedness and the effect of related variety on knowledge production and entrepreneurship.ARTICLE HISTORY

Location decisions of enterprise R&D investments as a function of related and unrelated regional industry structures: A multilevel study

“…Taken together, regions with related variety can increase innovation performance (Aarstad et al, ; Castaldi et al, ; Tavassoli & Carbonara, ) and economic growth (Boschma et al, ; Content & Frenken, ). Regions with unrelated variety are robust to increases in unemployment (Frenken et al, ), can be prone to develop disruptive innovations (Castaldi et al, ), but have a negative effect on enterprise productivity (Aarstad et al, ).…”

Economic drivers and specialization patterns in the spatial distribution of Framework Programme's participation

“…Seminal contributions from economists such as Myrdal and Kaldor had already emphasized the cumulative nature of economic development, also in relationship to knowledge dynamics, contributing to the explanation of persistent inter‐regional disparities (Berger and Elsner ). While their contributions paved the way to well‐known concepts like path‐dependency; more recently the evolutionary economic geography introduced the notion of ‘related variety’ (Boschma and Iammarino ; Frenken et al ; Content and Frenken ) to emphasize the importance of diversity of available knowledge within an innovation system (Suurs and Hekkert ; Uyarra ), though policy implications are difficult to be derived. While emphasizing cumulative dynamics, these evolutionary approaches conflict with mainstream neoclassical approaches, which argue for spatial specialization.…”

“…However, R&D activities are unevenly distributed across space and tend to concentrate in most competitive regions (Fagerberg et al ; Teirlinck and Spithoven ). The dynamics of this distribution needs to be further explored, specifically looking at regional effects of an ‘excellence‐driven’ policy rationale and trade‐offs between scientific specialization and diversification (Greunz ; Beaudry and Schiffauerova ; Content and Frenken ).…”

“…The second hypothesis comes from the debate on the (expected) benefits of regional specialization vs. diversification (Kemeny and Storper ). While the political debate is actually dominated by the EU policy named ‘smart specialization strategy’ (Foray et al ; McCann and Ortega‐Argilés ), the notion of ‘related variety’ seems the emerging alternative for regional development (Frenken et al ; Content and Frenken ). The debate on benefits of specialization relates to effects of spatial agglomeration of similar or divergent activities, in this case ‘excellent’ R&D activities (i.e., through FP participation).…”

“…Our second objective is to look back and test if, in the past, specialization was already in place prior to further specialization. Regions could also opt for diversification (still within FP‐defined activities), following Myrdal's () contributions on cumulative process (Berger and Elsner ; Kemeny and Storper ; Cherodian and Thirlwall ), and the emerging emphasis on ‘diversity’ and ‘variety’ to enhance regional competitiveness (Uyarra ; Content and Frenken ). Our second hypothesis refers mainly to the recent distinction between ‘relative’ and ‘absolute’ specialization, as proposed by Kemeny and Storper ().…”