Regional Branching and Local Knowledge Spillovers; a Coevolutionary Process between Relatedness and Co-location, mediated by Complexity

Abstract

Despite the burgeoning literature on knowledge spillovers, the regional branching thesis describes the relationship between technological relatedness and co-location as a unidirectional process. However, co-location could equally result in relatedness due to knowledge spillovers. Yet despite emerging insights on ‘coevolutionary processes’ in the proximity dynamics literature, a dualistic approach to date remains unexplored. Building forth on US patent data from 1850 till 2005 this study will add to the regional diversification literature by examining the ‘coevolving’ dynamics between two proximity configurations underlying knowledge spillovers and regional branching; technological relatedness and spatial co-location. The results confirm co-location does indeed also influence technological relatedness. Moreover, the results show a significant mediating role of technology age and complexity. Consequently, policy implications and directions for further research include the acknowledgement of regional differences in relatedness, given its ‘emergent’ characteristics.