Exploring a leading and lagging regions dichotomy: does entrepreneurship and diversity explain it?

Abstract

There has been a long debate about the role of industry structure in the literature on why some regions successfully achieve economic growth, while other regions stagnate or decline. This paper provides an empirical analysis in which we, based on a cluster analysis, develop a taxonomy for regional growth. In a second part of the study, we explore how specialization and entrepreneurship are meaningful to discriminate between the different types of regions. Our results suggest that regional entrepreneurship and industry diversity characterized by relatedness are key elements in understanding why some regions are leading while others lag behind. The suggested taxonomy is argued to contribute with a nuanced perspective that can enhance discussions about improvements of regional development policies and to further empirical analysis on the topic.