Regional vs. firm relatedness: What drives radical innovations?

Authors: Kolja Hesse*,
Topics: Economic Geography
Keywords: relatedness, radical innovations, firm-level, regional diversification
Session Type: Paper
Day: 4/4/2019
Start / End Time: 9:55 AM / 11:35 AM
Room: Diplomat Room, Omni, West
Presentation File: No File Uploaded

Since the seminal paper by Hidalgo et al. (2007) the importance of the relatedness of technologies for technological change, economic competitiveness and diversification processes has been highlighted in a series of studies (Frenken et al. 2007; Boschma et al. 2015, Castaldi et al. 2015). Therby, technological relatedness leads to path dependencies when new regional specializations emerge (Boschma et al. 2014). However, these path dependencies primarily lead to the creation of incremental innovations, which are not the ones with the greatest economic potential in the long term. In order to maintain a strong competitive position and conquer new challenges, radical innovations are necessary as well. Such radical innovations not only open up completely new markets and innovation opportunities, they might also provide the basis for long-lasting competitive advantage (Castaldi et al. 2015). So far, studies tend to show that rather the combination of unrelated activities supports the emergence of such radical innovations (Miguelez and Moreno 2017). However, evidence is far from conclusive. In particular, there is the need for studies that incorporate the organisational level. In particular, it is unclear how the diversity of an organisation’s technology portfolio interacts with a region’s technological diversity in the emergence of radical innovations. Hence, this paper aims at understanding how both levels of relatedness complement each other and thereby affect the emergence of radical innovations in order to shed light on the specific conditions under which radical change can occur.

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