On firms’ product space evolution: the role of firm and local product relatedness

Abstract

We explore the role of firm-and local product-specific capabilities in fostering the introduction of new products in the Turkish manufacturing. Firms' product space evolution is characterised by strong cognitive path dependence that, however, is relaxed by firm heterogeneity in terms of size, efficiency and international exposure. The introduction of new products in laggard Eastern regions, which is importantly linked to the evolution of their industrial output, is mainly affected by firm's internal productspecific resources. On the contrary, product innovations in Western advanced regions hinge relatively more on the availability of local technological-related competencies.

Who leads regional industrial dynamics? “New industry creators” in Chinese regions

“…Such a perspective predicates on debates about the trade-off between diversity and similarity: although firms that share a greater overlap in competences may find it easier to communicate with each other, only firms that possess nonoverlapping competences and know-how can actually offer something new to each other (Neffke et al, 2011). This new perspective based on technological relatedness, as interactive learning among economic actors stemming from the existence of a certain degree of cognitive proximity among them, has given new momentum to debates on the importance of agglomeration externalities for regional economic development (Lo Turco & Maggioni, 2015).…”

“…First, from the micro-level perspective, we need to acknowledge that although inter-firm technologically related knowledge spillovers are important in the evolution of a regional industrial structure, firm heterogeneity plays a role in the firms' choice of new industries (Neffke et al, 2018). Given the fact that the firms' abilities to explore new industries and diversify into new industries rely heavily on some firm-specific competences, organizational routines, and knowledge bases, it would be problematic to examine regional industrial dynamics only through meso-or macro-level analysis without paying attention to micro-level firm heterogeneity (Lo Turco & Maggioni, 2015;Martin, 2010). Martin (2010) has, however, pointed out that regional economies are composite systems, consisting of numerous heterogeneous firms with different market orientations, specific technologies, competences, resources, and business models, even though the firms may all belong to the same industry.…”

“…Homogeneity is rare, and firms in a locality often vary dramatically in their innovative and productive performance and developmental trajectory. Given the fact that the firms' abilities to explore new industries and diversify into new industries rely heavily on some firm-specific competences, organizational routines, and knowledge bases, it would be problematic to examine regional industrial dynamics only through meso-or macro-level analysis without paying attention to micro-level firm heterogeneity (Lo Turco & Maggioni, 2015;Martin, 2010).…”

Neighbourhood related diversity, human capital and firm innovation

“…Related diversity is commonly explored at some regional level, for example, labour market regions or states (cf. Frenken et al ; Bishop and Gripaios ; Mameli et al ; Castaldi et al ; Lo Turco and Maggioni ; Aarstad et al ). Such regions may be suitable when considering agglomeration economies in terms of sharing and matching, since these effects can be argued to extend over relatively large distances.…”

“…At the regional level some studies find a positive relationship between relatedness and firm innovation (cf. Lo Turco and Maggioni ; Aarstad et al ). Additionally, Castaldi et al () show that technological relatedness promotes regional degrees of innovation.…”