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Related variety and firm heterogeneity. What really matters for short-run firm growth?

Giulio Cainelli and Roberto Ganau

Entrepreneurship & Regional Development, 2019, vol. 31, issue 9-10, 768-784

Abstract: In recent years, two concepts have become key elements in economic geography: related variety and firm heterogeneity. The first one predicts that knowledge spillovers within a region/local system occur among firms operating in ‘different but related’ sectors. The second one assumes that knowledge spillovers can occur among ‘different’ firms belonging to the same localised sector/industrial cluster. Using a sample of 27,817 Italian manufacturing firms observed during the period 2010–2013, this paper analyses the role played by related variety and within-sector firm heterogeneity on short-run employment growth. The results suggest that both related variety and within-sector firm heterogeneity have a positive effect, although the latter has a higher impact than the former. These results confirm the role played by related variety, but identify firm heterogeneity as a potential additional source of local knowledge spillovers.

Date: 2019
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/08985626.2019.1571636

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