Industry diversification in industrial districts: is it about embedded regional or firm-level capabilities?

Abstract

[EN] We analyse whether regionally embedded or firm-level capabilities drive regional diversification in industrial districts, examining the relationship between relatedness and Marshallian agglomerations. We argue that regional diversification lacks an explicit mechanism to explain branching into new products, positing that the origin of regional product branching is based on firm-level heterogeneity of capabilities and diversification, which is overlooked. Using mixed methods and patent analysis (1895-2019; 3592 patents and utility models), product diversification in the Toy Valley district in Alicante (Spain) is analysed, showing that firm-level related diversification with extensive local search explains the mechanism of the regional relatedness diversification.