Turning Technological Relatedness into Industrial Strategy: The Productivity Effects of Smart Specialization in Europe

Giacomo Lo Conte, Andrea Mina and Silvia Rocchetta

Economic Geography, 2025, vol. 101, issue 1, 28-59

Abstract: In this article we evaluate the impact of smart specialization policies on European regional economies. We propose a novel analytical framework that considers the policy prescription defined by the entrepreneurial discovery process (EDP) in the identification of new growth opportunities and the role that technological relatedness plays in choosing the new industrial specialization priorities. We then estimate the effects of the policy by using an instrumental variables estimation approach to address endogeneity problems. We apply it to an extensive data set of 102 NUTS-2 regions extracted from the European Commission Smart Specialisation Portal. The results reveal that smart specialization strategies increased labor productivity as long as the priorities were set in sectors related to preexisting technological capabilities, indicating the fundamental importance of path dependency in diversification choices. The findings deepen our understanding of regional development and innovation strategies, and have relevant implications for the implementation of appropriate policy instruments.

Date: 2025
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Working Paper: Turning technological relatedness into industrial strategy: The productivity effects of Smart Specialisation in Europe (2023)
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DOI: 10.1080/00130095.2025.2456731

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