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Local variety and firm diversification: an evolutionary economic geography perspective

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  • Giulio Cainelli
  • Donato Iacobucci

Abstract

The aim of this article is to investigate whether and how local agglomeration forces—related and unrelated variety—influence firm diversification. Using a large dataset of 5112 Italian manufacturing business groups for the year 2001, and estimating Tobit models, we show the ‘consistency’ between the patterns of firm diversification and that of the local system in which the firm is located. Specifically, firms located in local systems dominated by unrelated variety are more likely to show unrelated diversification patterns, while firms located in local systems dominated by related variety are more likely to show related diversification patterns. This supports the Evolutionary Economic Geography prediction of firm similarity ‘within’ the same local system, and firm heterogeneity ‘between’ different local systems.

Suggested Citation

  • Giulio Cainelli & Donato Iacobucci, 2016. "Local variety and firm diversification: an evolutionary economic geography perspective," Journal of Economic Geography, Oxford University Press, vol. 16(5), pages 1079-1100.
    • Handle: RePEc:oup:jecgeo:v:16:y:2016:i:5:p:1079-1100.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbv040
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    Cited by:

    1. Gusnawan Adi Putra & Sri Mulyantini & Dianwicaksih Arieftiara, 2021. "Business diversification of coal mining companies as a strategy facing coal price volatility: The effect on company performance and share prices," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 3(4), pages 38-50, October.
    2. Federica Rossi & Magdalena Dej, 2020. "Where do firms relocate? Location optimisation within and between Polish metropolitan areas," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 64(3), pages 615-640, June.
    3. Li, Chong-Mao & Cui, Tao & Nie, Rui & Lin, Han & Shan, Yuli, 2019. "Does diversification help improve the performance of coal companies? Evidence from China's listed coal companies," Resources Policy, Elsevier, vol. 61(C), pages 88-98.

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