Industrial dynamics, space and networks in European regions

Abstract

The question of why some countries or regions experience higher growth rates and levels of development than others has been debated and studied for long time and remains one of the most important issues in political and economic debates. The aim of this thesis is to investigate some of the factors that contribute to the unevenness of economic performance among European regions, focusing in particular regional industrial composition, spatial and network relations and the technological and institutional characteristics of the regions. The role of industrial structure and composition of regions is assessed in relation to their knowledge and technological features (Chapter 1). Our results indicate that related variety exerts positive effects in only regions characterized by higher technological and knowledge capabilities, whereas no significant effect is found for average or less advanced areas. More generally, we conclude that different levels of knowledge endowment may condition the way knowledge-related externalities affect the local economy. Following this insight, we study spatial and network relations as sources for new knowledge (Chapter 2). In line with the previous literature we find that spatial and trade linkages indeed contribute to channeling new ideas and technologies in the regional economy, with a positive effect on local productivity. However, network connections to most advanced regions – which would potentially grant access to highly valuable knowledge - have no beneficial effect unless the “linking-in” region presents high level of absorptive capacity. Recent literature on institutions has shown how quality of government and social capital are important determinant of economic and innovative performance. Following some contributions in Evolutionary Economic Geography, we investigate how institutional factors interplay with industrial compositions. In Chapter 3, we show how industrial relatedness and bridging social capital are key drivers of regional diversification. Unlike, formal institutions do not directly affect regional branching, though some evidence suggests that they contribute to limiting the potentially negative effects of bonding social capital. The role of industrial relatedness in allowing knowledge and ideas to flow is further studied in relation to the presence, entry and exit of multinational enterprises (MNEs) (Chapter 4). We find that the number of MNEs in related sectors has significant effects on industrial employment only in knowledge-intensive industries in advanced regions. Additionally, the positive relation between employment level and proximity to industries attracting foreign companies provides supportive evidence of short-term knowledge spillovers. However, both intra- and inter-industry spillovers of MNEs are heterogeneous across industries and regions. Positive MNE externalities appear to be stronger in advanced sectors and, more surprisingly, in Eastern EU regions. These regions, however, are also those that suffer the most in the case of MNE exits.