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Regional economic structures and diversification

In an ever more complex economy, new and theoretically based methods are needed to describe regional economies, their strengths, their weaknesses and their development potential. In collaboration with Frank Neffke och Ljubica Nedelkoska , we have developed Skill relatedness analysis to describe and analyze regional economic structures. The method is based on the argument that human capital or skills are a key component of regional development, and the method pictures the economy as a network of industries. The industries are, to a certain extent, linked by dependence on a particular type of human capital or skills. This affects their development potential, but also the region's future transformation capacity. Through the method it is possible to get an initial picture of how well an industry is embedded in the regional resource structures, and thus the region's strengths (and weaknesses) from this specific perspective. The presence of related industries in a region is likely to affect companies' opportunities for knowledge sharing, and the ability of the labor force to find other productive jobs in the region. But present industries also form the basis for the regions' future expansion to new related businesses.

The relatedness links between industries correspond to some extent with traditional industry classifications, but the links also partly challenge our traditional insights into how business is structured. For example, the skills links between many advanced service industries and the manufacturing industry, and between the wholesale trade and manufacturing industries, are clearly visible.
Regions often have very distinctive business profiles within certain parts of the industry network. Industries that specialize in a region are often not solitary, but embedded in strong regional knowledge structures. Strong resources or skills in a region can also provide an indication of future opportunities for a region.

Skill relatedness is also related to the thinking behind the EU's smart specialization initiative.

Together with Frank Neffke, we have worked to develop the skill relatedness approach based on labor mobility and investigate how industries are related to each other.

Together with Frank Neffke and Ron Boschma , we have investigated how regional industry profiles change and how regional diversification works.

More information: Martin Henning

Page Manager: Martin Henning|Last update: 1/25/2018

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