Institutions and Diversification: Related versus Unrelated Diversification in a Varieties of Capitalism framework

Ron Boschma () and Gianluca Capone

No 1421, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: The Varieties of Capitalism literature has drawn little attention to industrial renewal and diversification, while the related diversification literature has neglected the institutional dimension of industrial change. Bringing together both literatures, the paper proposes that institutions have an impact on the direction of the diversification process, in particular on whether countries gain a comparative advantage in new sectors that are close or far from what is already part of their existing industrial structure. We investigate the diversification process in 23 developed countries by means of detailed product trade data in the period 1995-2010. Our results show that relatedness is a stronger driver of diversification into new products in coordinated market economies, while liberal market economies show a higher probability to move in more unrelated industries: their overarching institutional framework gives countries more freedom to make a jump in their industrial evolution. In particular, we found that the role of relatedness as driver of diversification into new sectors is stronger in the presence of institutions that focus more on ‘non-market’ coordination in the domains of labor relations, corporate governance relations, product market relations, and inter-firm relations.

Keywords: varieties of capitalism; institutions; relatedness; diversification; evolutionary economic geography (search for similar items in EconPapers)
JEL-codes: B52 L16 O43 P16 P51 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-11, Revised 2014-11
New Economics Papers: this item is included in nep-geo and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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http://econ.geo.uu.nl/peeg/peeg1421.pdf Version November 2014 (application/pdf)

Related works:
Journal Article: Institutions and diversification: Related versus unrelated diversification in a varieties of capitalism framework (2015)
Working Paper: Institutions and Diversification: Related versus Unrelated Diversification in a Varieties of Capitalism framework (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:1421

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