The Role of Entry and Market Selection for the Dynamics of Regional Diversity and Specialization

Abstract

Noseleit F. The role of entry and market selection for the dynamics of regional diversity and specialization, Regional Studies. Despite predictions that economic integration leads to increasing specialization, the opposite development has been observed at the regional level. Based on nearly three decades of West German data, this paper addresses the diversification of regional economic activity and emphasizes the role of industry dynamics, specifically newly entering business cohorts. Although a strong sectoral specialization evolves in the entry cohorts within and between regions over time, entries substantially increase the overall diversity of regions. Market selection favoured less similar entries in comparison with the initial industry structure and, thus, allowed regional diversity to increase. Overall, the regional specialization processes within each entry cohort did not become less important; however, the fields of regional specialization changed continuously over time, resulting in more diversity.

Noseleit F. 进入市场及市场选择之于区域多样性与专殊化动力关系的角色，区域研究。尽管经济整合预料将能促进专殊化，区域层级却出现相反的发展趋势。本文根据西德将近三十六年的数据，探讨区域经济活动的多样化，并强调产业动力、特别是新进的商业团体所扮演的角色。仅管新进团体在区域中和区域间随着时间逐步发展出显著的部门专殊化，但却大幅提高了区域的总体多样性。相较于初级产业结构而言，市场选择更为偏好不同的产业进入，因而促进了区域多样化。总体而言，各新进群体的区域专殊化进程并非逐渐式微，但区域专殊化的场域却随着时间不断改变，导致更大的多样性。

Noseleit F. Le rôle de la pénétration et du choix du marché quant à la dynamique de la diversité et de la spécialisation régionales, Regional Studies. En dépit des prévisions selon lesquelles l'intégration économique entraîne une augmentation de la spécialisation, on a constaté que l'inverse s'est produite sur le plan régional. À partir des données pour l'Allemagne de l'Ouest couvrant une période de trois décennies, cet article cherche à aborder la diversification de l'activité économique régionale et met l'accent sur le rôle de la dynamique industrielle, notamment les nouvelles cohortes d'entrants commerciaux. Bien qu'une forte spécialisation sectorielle fasse le jour dans le temps parmi les entrants sur le plan intrarégional et à l'échelle interrégionale, les entrants augmentent sensiblement la diversité globale des régions. Le choix du marché a favorisé des entrants moins similaires par rapport à la structure industrielle initiale et a permis ainsi une augmentation de la diversité. En général, les processus de spécialisation régionale au sein de chaque cohorte d'entrants ne sont pas devenus moins importants; cependant, les domaines de la spécialisation régionale ont changé constamment dans le temps, ce qui a entraîné une augmentation de la diversité.

Noseleit F. Die Bedeutung von Markteintritt und -selektion für die Dynamik der regionalen Diversität und Spezialisierung, Regional Studies. Entgegen der häufig postulierten Annahme, wirtschaftliche Integration führe zu einer verstärkten Spezialisierung, kann auf regionaler Ebene eine zunehmende Diversifikation ökonomischer Aktivitäten beobachtet werden. Der vorliegende Aufsatz befasst sich mit der Bedeutung von Industriedynamik, insbesondere neuen Markteintritten, für regionale Diversifikationsprozesse. Eine Analyse westdeutscher Regionen über ca. drei Jahrzehnte verweist auf eine bedeutsame Rolle von Gründungen für diese zunehmende regionale Diversifikation trotz ausgeprägter sektoraler Spezialisierungsprozesse in Gründungskohorten innerhalb einer Region sowie zwischen Regionen. Zudem kann beobachtet werden, dass der Prozess der Marktselektion eine abweichende sektorale Zusammensetzung von Neugründungen im Vergleich zur bereits bestehenden Industriestruktur begünstigt. Insgesamt sind regionale Spezialisierungsprozesse innerhalb der jeweiligen Gründungskohorten nicht weniger bedeutsam geworden, jedoch haben sich die sektoralen Schwerpunkte dieser Spezialisierung kontinuierlich gewandelt, sodass eine verstärkte regionale Diversifikation auftritt.

Noseleit F. La importancia de la entrada y selección del mercado para las dinámicas de la diversidad y especialización regionales, Regional Studies. Pese a las predicciones de que la integración económica conduce a una mayor especialización, observamos un desarrollo opuesto en un ámbito regional. Basándonos en casi tres décadas de datos de Alemania occidental, en este artículo abordamos la diversificación de la actividad económica regional y recalcamos el papel de las dinámicas de la industria, en concreto las cohortes de negocios que acaban de introducirse en el mercado. Aunque con el tiempo se desarrolla una sólida especialización sectorial en las cohortes de entrada dentro de las regiones y entre ellas, las entradas aumentan considerablemente la diversidad general de las regiones. La selección del mercado favorecía entradas menos similares en comparación con la estructura industrial inicial y, por tanto, permitía que aumentase la diversidad regional. En general, los procesos de especialización regional en cada cohorte de entrada no resultaban menos importantes; sin embargo, los campos de la especialización regional cambiaban continuamente con el paso del tiempo produciendo más diversidad.

KEYWORDS:

• Diversity
• Specialization
• Entries
• Market selection
• Industry dynamics

关键词:

• 多样性
• 专殊化
• 进入市场
• 市场选择
• 产业动力

MOTS CLÉS:

• Diversité
• Spécialisation
• Entrants
• Choix du marché
• Dynamique industrielle

SCHLÜSSELWÖRTER:

• Diversität
• Spezialisierung
• Markteintritt
• Marktselektion
• Industriedynamik

PALABRAS CLAVE:

• Diversidad
• Especialización
• Entradas
• Selección del mercado
• Dinámicas de la industria

JEL classifications:

• L11
• O10
• R11
• R12

Acknowledgment

The author would like to thank Michael Fritsch, Udo Brixy and three anonymous reviewers for their valuable comments.

Notes

1. Dixon and Freebairn (2009), Ezcurra et al. (2006), Hallet (2000), and Robson (2009) found evidence that most regions analysed became less specialized over time. Kim (1995) documented a decline of regional specialization in the United States since the 1930s. Combes and Overman (2004) reported a mixed pattern with 50% of European Union regions becoming less specialized and 50% becoming slightly more specialized.

2. In a world of symmetric regions and industries, decreasing concentration of industries refers to increasing regional diversity. Yet this relationship does not hold per se. For example, specific growth differences may invalidate this link. This would be the case if larger industries grow faster than smaller industries, while larger regions grow less than smaller regions (Aiginger and Davies, 2004). For this discussion this possibility is ignored and it is assumed that geographic concentration and regional diversity are negatively related as the conditions that set off this relationship are rather the exception than the general rule.

3. Civil servants and self-employed individuals are not incorporated in the data since they are not subject to social security coverage.

4. The analysis is limited to West Germany because of a lack of reliable data and the specific conditions for East German regions after reunification.

5. In a study based on German social insurance data as well, Hethey and Schmieder (2010) observed a misspecification that amounted to around 0.82% of all classified entries as ID changes (for example, due to property right changes) and another 0.95% were considered to be unclear.

6. In fact, a significant negative marginal effect was found for regions within the upper 5% of the size distribution. The inverted ‘U’-shape found seemed to be caused by strongly agglomerated regions in the Ruhr area, specialized in traditional industries and heavily affected by structural change, and agglomerated regions specialized in services.

7. The difference observed can be only an indication of the contribution of new businesses to the diversification of the regional industry structure because it is impossible to say how the diversity measure based on incumbent businesses would have developed without new entries.

8. Based on pooled data over all years, overall diversity based on measure (2)(2) $Averagerregionaldiversit{y}_t=\sum _{r=1}^R\left(1-\sum _{s=1}^S{\left(\frac{em{p}_{r,s,t}}{em{p}_{r,t}}\right)}^2\right)/R$(2) does not differ between agglomerations, moderately congested regions and rural areas. However, the variation between regions may be substantial.

9. In Fig. A2 in Appendix A reports the average development in entry cohorts for different region types (agglomerations, moderately congested areas and rural regions). The pattern found for the average region can also be found for the averages of region types. Also, the level differences between region types are in line with the expectations: agglomerations have the highest levels and rural regions the lowest levels of average diversity of entries. The decrease over time is approximately the same for all three types of region.

10. In order to explain the decreasing specialization found in previous studies, one central argument raised to explain this pattern was the general shift from manufacturing to services (Hallet, 2000; Combes and Overman, 2004). The argument is that the level of sectoral disaggregation is finer for manufacturing than for services. Another argument might be that a larger share of services serves local markets. However, as shown in Fig. A3 in Appendix A, also the shift towards services cannot fully explain the increasing diversity of economic activity as an increase of diversity for manufacturing industries can also be observed.

11. It might be argued that a shift from specialization by sector towards specialization by function can explain the increasing diversity in regions (Duranton and Puga, 2005). However, based on regional employment data of occupational groups for the years 1987–2002, no trend towards regional specialization in the distribution of occupations can be observed. Rather, the average region experienced an increase of diversity of occupations (see Fig. A4 in Appendix A). Occupation data are provided by the Federal Employment Agency. Diversity based on occupational data was calculated in a similar way as diversity based on industry employment shares.