Entrepreneurship and the Geography of Innovation : Essays on the Role of Related Variety

The traditional view that large industrial corporations are the primary engines of innovation and economic progress has gradually been replaced by the notion that place is the key organizing platform for innovative activity in the modern knowledge economy. The geography of innovation has shown that innovative activities tend to cluster in space, due to the advantages of certain cities and regions. Recent literature suggests that a regional diversity of economic activities that are related in a cognitive or technological sense is advantageous, as it facilitates knowledge spillovers that foster positive economic outcomes. This re-specifies the traditional dichotomy between economic specialization and diversity and opens up new lines of inquiry. This thesis aims to contribute to the literature on the geography of innovation and related variety with studies that treat the relationships between related industry variety, innovation and entrepreneurship in explicit fashions, thus addressing important research gaps. The overall purpose of the thesis is therefore to examine and explain the relationship between regional related variety and regional economic change, in terms of: (a) entrepreneurship, and; (b) innovation. The thesis consists of an introductory text and five appended papers. Paper 1 provides a bibliometric study of the literature on related variety, while papers 2 to 5 provide empirical analyses that address the implications of related variety for regional economic outcomes in terms of growth, entrepreneurship and innovation. The main findings of the thesis work suggest that related variety facilitates knowledge spillovers that unlock entrepreneurial opportunities, and that knowledge spillover entrepreneurship underpins the external economies of scope that arise from related variety. In addition, the thesis finds that entrepreneurship is an important driver of economic diversification in related activities. Furthermore, findings presented in the thesis align with previous literature that has reported a positive influence of related variety on regional innovation, which indicates the presence of positive knowledge externalities that foster innovation. It is however argued that the thesis work extends on previous findings by emphasizing the function of entrepreneurship in realizing the knowledge spillover effects of related variety. The importance of entrepreneurship is further reinforced by the finding that unrelated variety in particular is associated with firm-level entrepreneurial innovation. Drawing on the notion of Knightian uncertainty, the thesis work concludes that the process of innovation may require business decisions under ‘true’ uncertainty about expected returns, particularly when combinations of unrelated knowledge are attempted as they are new and unprecedented, and such pursuits can be understood as acts of entrepreneurial innovation.