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ABSTRACT
Since the introduction of the related variety concept in 2007, a number of studies have been undertaken to analyse its effect on economic development. Our review of 21 studies makes clear that most studies find support for the initial hypothesis that related variety supports employment growth, though some studies suggest that the growth effects of related variety may be specific to knowledge-intensive sectors only. From the review, we list a number of further research questions regarding methodology, the role of unrelated variety, different forms of relatedness and the effect of related variety on knowledge production and entrepreneurship.
Acknowledgements
We thank Johannes Van Biesebroeck, Claire Economidou, Mark Sanders and Erik Stam for their useful comments. The usual caveat applies.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. Note that most studies also take into account a competition variable, following Porter’s (Citation1990) work on the advantages of competition (in clusters).
2. Analogously, some authors prefer to speak of geographies of scope (Florida, Mellander, & Stolarick, Citation2012) instead of related variety.
3. Given the macro-scope of the review with a focus on regional and national growth, we do not go into micro-level studies investigating the effect of regional related variety on firm performance. This is, to a large extent, already covered by a recent review by Frenken, Cefis, and Stam (Citation2015) on industrial dynamics in clusters. From this review, it became apparent that firms profit most if co-located with firms in other, but related, industries rather than being co-located with firms operating in the same industry. In the latter environments, the benefits from learning from firms in the same industry may well be offset by increased competition as well as knowledge spillovers to direct competitors, especially for the more advanced firms.
4. We selected papers to review by searching for papers that (i) cited Frenken et al. (Citation2007) in case of the related variety studies, or (ii) Hidalgo et al. (Citation2007) in case of the branching studies, or (iii) contained the keyword ‘related variety’, or (iv) contained the keywords ‘revealed comparative advantage’ and ‘proximity’.
5. A country has a comparative advantage in a product if the product’s share in a country export portfolio exceeds the product’s share in total trade worldwide. This is measured by Revealed Comparative Advantage (RCA).
6. A more extensive study was reported in the working paper Hausmann and Klinger (Citation2007).
7. Hidalgo and Hausmann (Citation2009) later developed a method that captures an economy’s complexity and show that higher levels of complexity of an economy are associated with higher levels of income. Their method is based on two dimensions: the first is the ubiquity of the products exported (By how many countries is a product exported?) and the second is the diversification of an economy (How many products does a country export?). They show there is a negative relationship between these two dimensions, that is, diversified countries tend to export less ubiquitous products. For further refinements, see Tacchella, Cristelli, Caldarelli, Gabrielli, and Pietronero (Citation2012) and Cristelli, Tacchella, and Pietronero (Citation2015).