Regional economies tend to expand into industries technologically similar to existing ones
In short: Researchers analyzing 30 years of economic data from Sweden found that regions often diversify by branching into industries related to their existing industrial base. By tracking 70 Swedish regions between 1969 and 2002, the study observed that new growth paths are frequently dictated by technological proximity rather than random expansion.
The study highlights how path dependency shapes regional development. Regions with high technological cohesion tend to maintain this profile over time because industries that align with existing expertise are more likely to enter and stay in a region, while unrelated ones often exit.
The researchers used plant-level data and a new indicator of technological relatedness to analyze the manufacturing landscape. A limitation of the study is its focus on specific historical data from Sweden, which may not perfectly represent all global economic contexts.
Why it matters: Economic geography suggests that regions often grow by building upon what they already know how to do technologically.
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Sources
- Summary by Intellect · source: Research: Neffke et al. (2011). How Do Regions Diversify over Time? Industry Relatedness and the Development of New Growth Paths in Regions. Economic Geography.
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