Evolutionary economic geography and its implications for regional innovation policy

Related variety is important to regional growth because it induces knowledge transfer between complementary sectors at the regional level. This is accomplished through three mechanisms: spinoff dynamics, labor mobility and network formation. They transfer knowledge across related sectors, which contributes to industrial renewal and economic branching in regions. Since these mechanisms of knowledge transfer are basically taking place at the regional level, and because they make regions move into new growth paths while building on their existing assets, regional innovation policy should encourage spinoff activity, labor mobility and network formation. Doing so, policy builds on region-specific assets that provides opportunities but also sets limits to what can be achieved by policy. Public intervention should neither apply Îone-size-fits-allÌ approaches nor adopt Îpicking-the- winnerÌ strategies, but should aim to connect complementary sectors and exploit related variety as a source of regional diversification.