Related variety, region-specific context, and regional economic performance: Empirical evidence from post-socialist Slovakia

Abstract

ABSTRACT The purpose of the article is to uncover the relationship between related variety in technology-intensive industries in the manufacturing sector and the region-specific context of Slovakia. The authors employed a dynamic panel model covering the 2009–2019 period. The aim was to determine the extent to which the regional context influences the benefits of related variety on regional economic performance. To understand the deeper structures and mechanisms of related variety, it was divided according to the technology-intensive industries. The results indicate that only unrelated variety positively determines regional employment growth. However, in combination with regional context, even the related variety mechanism becomes significant. When the related variety was decomposed, it was found that only the related variety in low-tech industries supported regional employment growth. By contrast, the industrial specialization in high-tech industries had a significant impact on the regional employment growth. When contextual conditions were taken into consideration, the effects of industrial specialization (low value of related variety) in high-tech industries disappeared. The authors conclude that contextual conditions, particularly foreign direct investment, are strong predictors for explaining regional employment growth, as they have the potential to shape the effects of related variety mechanism.