Firm employment growth: the influence of related variety; A study on firm employment growth in Flevoland

Abstract

There has been a long tradition to explain regional employment growth with the regional portfolio of firms. While Marshall (1890) argues that regional specialisation is most beneficial for regional employment growth, Jabobs (1969) argues that a diversified region is most beneficial for regional employment growth. The most recent addition to the specialisation/diversification debate comes from Frenken et al. (2007). In their paper Related variety, unrelated variety and regional economic growth they argue that regions that have a portfolio of different but related firms, termed related variety, are most likely to see employment growth. Empirical studies tend to confirm this relation.

Referring to among others Coleman (1987), this thesis rejects the existence of any such relation between related variety and regional employment growth. As employment growth does not stem from regions but indeed from firms, the only appropriate level to study employment growth is at the level of the firm. Hence, this thesis focusses on the relation between related variety and firm employment growth.

This thesis has empirically studied the influence of related variety, operationalised as the amount of related employment within the municipality of the firm, on firm employment growth in the Dutch province of Flevoland between 1989 and 2014. For this purpose a comprehensive firm year dataset was developed. The results of the empirical study in this thesis are clear. While related variety may be positively related to regional employment growth there is no significant correlation between related variety and firm employment growth, controlled for other factors.