Evolution of industrial diversification and its determinants in West Germany: Evidence from population data of enterprises

Germany is among the largest countries in the world in terms of total GDP, owing largely to rapid industrialization and expansion of economic activities into several sectors. This paper contributes to the literature on German economic development by investigating the evolution of industry diversification in Germany; particularly focusing on the recent concepts of related (RV) and unrelated variety (UV) in West German regions. It also identifies the statistical and economic determinants of variation in variety over time. Among several industry structure measures; RV is the only measure that reveals a pronounced increasing trend. Since RV is composed of two parts: 1) entropy at five-digit within a two-digit classification, and 2) shares of two-digit sectors in total output, we examined which of the two components dominate. Our findings suggest that the entropy component within two-digit sectoral shares of the RV index is more dominant than the two-digit sectoral shares themselves. We further examined entries and exits of the firms among regions with top and bottom rankings in RV. Findings suggest that both the top and bottom regions experienced an increase in the total number of industries, however, exits were much less pronounced in the bottom regions. It suggests that an increase in variety among top regions is the result of the creative destruction type effect where new industries force inefficient old industries to leave the region. Finally, analysis shows support for the inverse u-shaped relationship between development and diversification.

Does (un)-related variety promote regional innovation in China? Industry versus services sector

Purpose Although recent studies have increased attention on the effects of related and unrelated variety on innovation, a Chinese test has until now been missing from the literature. This paper aims to investigate how related and unrelated variety affect regional innovation in Chinese provinces. In particular, emphasis was placed on differentiating the analysis for the industry and services sectors at a detailed sectoral level. Design/methodology/approach This paper’s sample is composed of 30 provinces in China from 2003 to 2016. Feasible generalized least squares was used to estimate the effects of related and unrelated variety on regional innovation. Findings The results show that related variety in all sectors promotes regional innovation, whereas unrelated variety in all sectors does not play a role. In-depth analyses were performed by comparing the industry and services sectors. Only related variety in the industry sector and unrelated variety in the services sector promote regional innovation, whereas unrelated variety in the industry sector exerts a negative effect. After dividing the country into eastern, central and western regions, different findings appear in the sub-samples. Originality/value This study contributes to the literature on evolutionary economic geography and innovation by exploring how related and unrelated variety promote regional innovation in a developing country context (China). It also sheds light on the sectoral and regional differences in the influence of related and unrelated variety on regional innovation.

Heterogeneous relatedness and firm productivity

In this manuscript, we relate regional structural composition—related and unrelated variety—to firm-level productivity in European regions, applying a Cobb–Douglas production function framework and using firm-, industry- and regional-level mixed hierarchical (multilevel) models. Our analyses indicate that regional-related variety has a positive impact on firm productivity in European regions, especially for firms in high-tech and medium-tech regions. These outcomes have implications for European policies on competitiveness as firms embedded in regions without these technological and institutional circumstances are systematically worse off in terms of productivity, and catching-up is not obvious for such regional economies.

Which Export Variety Matters for Urban Economic Growth, Related or Unrelated Variety?

The relationship between export variety and economic growth has been paid much attention in academia. This paper discusses more deeply the relationship between export related and unrelated variety and economic growth, rather than mere export variety. This paper uses the entropy measurement method to measure the level of export variety of Chinese cities and use the concept of “proximity” proposed by Hidalgo to divide the related variety and unrelated variety. Using the panel data of 252 prefecture-level cities in China from 2000 to 2011, we attempt to explore the relationship between export variety, related and unrelated variety and urban economic growth. The empirical results show that it is not export variety as such, but related and unrelated variety that has effects on economic growth. Export related variety has a positive effect on economic growth, while unrelated variety has a negative effect. And there are obvious regional and size differences. The impact of export related and unrelated variety on eastern and coastal cities is greater than that on central and inland cities, and the impact on large-size cities is also greater than that on medium-size cities.

Economic Diversification and Human Development in South Asia

The paper examines the effect of diversification on social welfare in South Asia using the macroeconomic data for the period 1996–2011, with export diversification as a proxy of economic diversification. In this paper, three types of diversification are assessed (i.e. related, unrelated, and overall variety). While unrelated variety and overall variety show increasing trend over the years, related variety seems to show a non-linear inverted U-shaped curve. Estimation results reveal that all three types of variety have a positive and significant relationship with human development in South Asia, which shows that diversification is beneficial for human development in South Asian countries. It is also found that the existing level of human capital significantly moderates the relationship between related variety and social welfare.