Abstract
This paper investigates the relationship between technological relatedness and firm productivity and the role of firms’ own technological capabilities in moderating that relationship. Importantly, proxies for the Marshallian sources of relatedness – input-output linkages, labour pooling, and knowledge spillovers – are developed to better reveal the mechanisms driving relatedness. As an identification strategy, matching techniques are combined with a difference-in-differences strategy to study the impact of technological relatedness (and its sources) on firm productivity following more intense state-enterprise reforms. The results reveal that overall relatedness, and each respective marshallian source, boosts firm productivity. Although the firm’s absorptive capacity and ownership structure matters, particularly in areas following more intense state enterprise reforms.
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