Unrelated knowledge combinations - new windows of opportunities for economic diversification beyond EGG?

Authors: Bjorn Asheim*,
Topics: Economic Geography, Economic Geography
Keywords: Unrelated knowledge combinations, economic diversification, smart specialisation
Session Type: Paper
Day: 4/7/2020
Start / End Time: 10:15 AM / 11:30 AM
Room: Director's Row E, Sheraton, Plaza Building, Lobby Level
Presentation File: No File Uploaded

EEG research has found that unrelated diversification takes place in very few cases, for example, in countries with higher levels of human capital at an intermediary stage of economic development (South Korea in the 1980s), and in advanced countries with a high innovation capacity. The general recommendation of EEG research to regions looking for S3 diversification options is, thus, to pursue a ‘low risk-high benefit’ strategy of path branching into industries with higher knowledge/technology complexity while still being related to existing industries in the region. This strategy will only capture current value creation potentials. An unrelated diversification strategy of diversifying into industries with high knowledge/technology complexity, which would create new value creation potentials, is called a ‘high risk-high benefit’ alternative, and is not recommended.
However, there are some shortcomings of the related variety analyses and policy advice. By predicting the future based on empirical studies of the past, it is narrowing the scope of future windows of opportunities for regional economic diversification. An evolutionary approach is not based on a social ontology, as it is a science approach, and, thus, it underestimates the role and potentials of agency as well as of new technologies (KET), that cannot be read out of previous technological development. Consequently, the EEG approach does not recognise that unrelated diversification also can take place in middle-income countries without a high level of human capital (Thailand) and in moderate innovative regions (Portugal). The paper will develop a more nuanced understanding of unrelated diversification to capture such cases.

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