Technological Diversification in Peripheral Regions: An Empirical Study on the Importance of Interregional Linkages across European Regions

Abstract

This thesis puts the literature on Evolutionary Economic Geography central and assumes that technological diversification is necessary in peripheral regions to foster sustainable and inclusive growth across regions. However, the paradox is that peripheral regions are less probable to diversify because they tend to lock-into their existing specialisations. Therewith, the knowledge production in peripheral regions is low, and due to the principle of relatedness, peripheral regions are prone to lock-into their narrow knowledge base. The literature on economic geography suggests that interregional linkages leads to external knowledge spillovers and therefore complements internal knowledge production. Thus, interregional collaboration is especially important for peripheral regions to escape a lock-in into their existing specialisations. This thesis scrutinises this general perception on interregional linkages by explaining that core and peripheral regions receive different benefits from external knowledge spillovers. The main research question is: How do the interregional linkages with core and peripheral regions affect the probability of a region to technologically diversify?

To answer this question the thesis adheres to a quantitative explanatory and exploratory approach to understand technological diversification in core and peripheral regions. The analyses draws upon economic and patent data between 2005-2018 to investigate the entry of technological fields. The conclusions are as following. First, regression models suggest that external knowledge spillovers from core regions are of greater importance to technological diversification than that from peripheral regions. Further analysis of assortative mixing shows that core regions increasingly collaborate with core regions whilst peripheral regions remain rigid and do not increase in interregional collaboration. Therefore, the importance of interregional collaboration seems promising in theory but might not entirely enable peripheral regions to catch-up to core regions. Nevertheless, external knowledge spillovers through collaboration remain crucial for technological diversification in peripheral regions. Second, a network analysis of co-invention reveals that those peripheral regions that do diversify are exceptionally high in betweenness centrality. Likely, these regions can function as a bridge between core and peripheral regions, for instance, due to providing access to different labour markets (and migration), or flows of natural resources. Third, whilst peripheral regions do show low novelty in technological diversification, an unexpected novel finding is that core regions that do collaborate with peripheral regions show highest novelty in technological diversification. Therefore, potentially, the collaboration between core and peripheral regions induces recombination of knowledge that is new to the world.