Dynamic Nature of Relatedness, or What Kind of Related Variety for Long‐Term Regional Growth

Abstract

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’.

Regional differences in how related variety ‘works’: the case of labour mobility

“…One early explanation for such mixed results was that potential for knowledge spillovers varies by sectors (Bishop and Gripaios 2010;Hartog, Boschma, and Sotarauta 2012;Innocenti and Lazzeretti 2019). In recent work another explanation has emerged which shows that relevance of related variety differs by type and development capabilities of regions (Firgo and Mayerhofer 2018;Kuusk and Martynovich 2021;van Oort, de Geus, and Dogaru 2015). Other scholars have taken a more critical stand demonstrating potential negative effects of related variety (Fitjar and Timmermans 2019).…”

“…Moreover, the focus on labour flows between industry-pairs makes a network measure more suitable than a system-wide entropy indicator. Also, many skill relatedness linkages are between 2-digit industry classification groups (Henning 2019;Kuusk and Martynovich 2021) and RSR allows this.…”

“…At the same time, empirical evidence is still inconclusive (Content and Frenken 2016). Not all industries (Bishop and Gripaios 2010;Hartog, Boschma, and Sotarauta 2012) and regional types benefit equally from related variety (Firgo and Mayerhofer 2018;Kuusk and Martynovich 2021;van Oort, de Geus, and Dogaru 2015). Some recent studies are even more critical arguing that over-relatedness hinders growth (Innocenti and Lazzeretti 2019) and that related variety can sometimes have negative externalities (Fitjar and Timmermans 2019).…”

The black box of regional growth

“…Furthermore, such measures of related variety disregard potential intertemporal dynamics in the relatedness linkages between various industries in the process of technological development (Martynovich 2016). Therefore, in long-term studies, it is more reasonable to employ measures of related variety based on revealed relatedness (Kuusk and Martynovich 2020). Following Neffke and Henning (2013), we claim that excessive exchange of labour between two industries signals overlapping skill requirements between them and indicates that these industries are related.…”

Skill-relatedness and employment growth of firms in times of prosperity and crisis in an oil-dependent region

“…This is because related activities represent a potential for new combinations on the one hand, and they share similar knowledge and skills that might enhance knowledge spillovers on the other hand. Related variety has often been shown to have a positive effect on regional growth (Boschma et al, 2014; Frenken et al, 2007; Kuusk and Martynovich, 2021; Tavassoli and Carbonara, 2014). Moreover, relatedness has been found to be a key input for regional diversification (Essletzbichler, 2015; Kogler et al, 2013; Muneepeerakul et al, 2013; Neffke et al, 2011).…”