Entrepreneurial path dependency in labour market regions: a longitudinal panel study of related and unrelated variety

ABSTRACT

We study entrepreneurial path dependency by tracing the development of related and unrelated variety in labour market regions in Norway between 1992 and 2012. Path dependency means that the current socioeconomic process is a function of previous states, related variety means that the regional industry structure is complementary with an overlapping knowledgebase, while unrelated variety means that the structure is fragmented with limited complementarity. With regard to related variety, we find a favourable long-term entrepreneurial path-dependent effect, as the regional industry structure reproduces a pattern of overlapping cognitive models that are transferred into the very fabric of new firms in the regional economy. With regard to unrelated variety, we find no entrepreneurial path-dependent effects at all. We finally find that the regional industry size has an entrepreneurial path-dependent effect on related and unrelated variety, but it is short-term and abates over time. We address the findings’ implications for entrepreneurship.

KEYWORDS:

• Strong and weak path dependency
• regional industry structures
• entrepreneurship
• panel data
• related and unrelated variety

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Jarle Aarstad http://orcid.org/0000-0002-6650-6667

Notes

1 Despite the fact that Aarstad et al. (2016a) found negative productivity gains from regional unrelated variety, other research has shown that unrelated variety can, in fact, induce radical or breakthrough innovations (Castaldi et al., 2015), probably due to the combining of highly dissimilar technologies. Saviotti and Frenken (2008) also showed that unrelated variety in the export sector induces long-term economic growth. However, we show later that an established unrelated regional industry structure has no path-dependent effect on the future regional entrepreneurial industry structure at all, and argue that potential implications can be both positive or negative.

Additional information

Funding

This work was supported by The Research Council of Norway [Grant Number 272054].