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Quality of government and social capital as drivers of regional diversification in Europe

Author

Listed:
  • Nicola Cortinovis
  • Jing Xiao
  • Ron Boschma
  • Frank van Oort

Abstract

Industrial diversification is considered crucial for economies to prosper. Recent studies have shown that regional economies tend to diversify into sectors that are related to those already present in the region. However, no study yet has investigated the impact of regional institutions. The objective of the paper is to bring together the literatures on related diversification and institutions by analyzing how formal and informal institutions influence regional diversification. Analyzing 118 European regions in the period 2004 and 2012, we find evidence that institutions matter for regions to diversify into new industries. Bridging social capital is a key driver of regional diversification, in addition to relatedness, in contrast to quality of government in regions. Bonding social capital has a negative impact in regions with a low quality of government. This suggests that regional institutions relevant for structural change in regions are predominantly informal in character rather than formal, and bridging rather than bonding.

Suggested Citation

  • Nicola Cortinovis & Jing Xiao & Ron Boschma & Frank van Oort, 2016. "Quality of government and social capital as drivers of regional diversification in Europe," Papers in Evolutionary Economic Geography (PEEG) 1610, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised May 2016.
    • Handle: RePEc:egu:wpaper:1610
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    Keywords

    regional diversification; social capital; quality of government; institutions;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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