Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy

No 2016/2: Explaining regional economic performance: the role of competitiveness, specialization and capabilities

Jan Fagerberg () and Martin Srholec ()
Additional contact information
Jan Fagerberg: CIRCLE, University of Lund, IKE, University of Aalborg, TIK, University of Oslo
Martin Srholec: CIRCLE, University of Lund, CERGE-EI, Charles University and Economics Institute of the Czech Academy of Sciences

Abstract: This paper is concerned with the explanation of differences in regional economic performance. The first part of the paper presents an overview of how theoretical and applied work of relevance for the analysis of regional economic performance has evolved to its present stance. This leads to the identification of two central factors for regional economic performance, that is, capability building and specialization. There is ample evidence on the impact of these two factors on economic development at the national level, but lack of relevant data has until recently made it difficult to explore these relationships at the regional level. This paper uses data that has recently become available for European regions to delve further into the relationships between capability building, specialization and economic performance. The analysis shows that regional economic performance and capability building does indeed go hand in hand, while the evidence regarding the impact of specialization is more mixed. Finally, the implications of these findings for regional policy and future research are considered.

Keywords: Capabilities; Specialization; Regions; Related Variety; Smart Specialization

JEL-codes: E14; O30; O38

29 pages, January 18, 2016

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