Entrepreneurship programmes has frequently been viewed as a policy intervention mechanism for reducing unemployment. Some have gone so far as to propose that entrepreneurship development to be the panacea for unemployment reduction. Theoretical work and empirical results have been inconclusive in relation to whether unemployment fosters self-employment or if it is the other way around. In this empirical study we examine the dynamic relationship between unemployment, self-employment and regional productivity adopting a cross-lagged design to assert the causal relationship between the variables. Results reveal that levels of self-employment and regional productivity predicts decreased unemployment. Results do not reveal unemployment to predict self-employment and regional productivity. 

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view that large industrial corporations are the primary engines of innovation and economic progress has gradually been replaced by the notion that place is the key organizing platform for innovative activity in the modern knowledge economy.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. 

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.

The notion of related variety has proved to be an important contribution to the literature on innovation-enhancing regional knowledge externalities in different industry structures. Related variety provides a disentangled view of diversification based on the technological and cognitive proximity of different industries. The core hypothesis of this concept, which states that related variety fosters innovation and employment growth by facilitating knowledge spillovers, has gained increasing empirical support. To date, a relatively modest number of empirical studies have explicitly linked related variety to enhanced regional innovative output. The role of entrepreneurship has also received little attention in the literature, even though economic theory emphasizes that entrepreneurs have an important role in transforming spillovers of knowledge into innovation and growth. The purpose of this paper is to contribute to the extant literature on regional innovation with an analysis that probes deeper into the mechanism by which related variety fosters innovation, and to examine how knowledge appropriation mechanisms affects the entrepreneurial opportunities that external knowledge presents. Our empirical analysis employs a moderated and mediated model with non-linear knowledge spillover effects of related variety. We use panel data on 60 Swedish functional analysis regions for the years 2008–2016 and estimate fixed effects models to examine the relationships between related variety, regional innovation and entrepreneurship. Conceptually, our results disentangle the effects of regional knowledge stocks and related variety on the rate at which new ideas are commercialized through entrepreneurship. We find a substantial direct effect of knowledge stocks, and an important indirect effect via knowledge spillovers between cognitively similar firms. A key contribution of this paper is that we show that this effect is conditional on the extent to which knowledge appropriation mechanisms are implemented, which has not been adressed in the literature on knowledge spillover effects of related variety before. Another novel contribution of this paper is that we find evidence of diminishing marginal returns to related variety with respect to innovation and entrepreneurship.

Traditionally, the economic literature has argued that regional economic success requires physical proximity of actors, close access to larger markets/ customers, and availability to utilise different kinds of knowledge and support resources. Previous research, such as Michael Porter’s studies on clusters or Richard Florida’s studies on the creative class, have underpinned an understanding that metropolitan areas (and metropolitan areas only) possess the conditions required for developing into hubs for a dynamic development and highly specialised activities. The concept of geographical proximity is defined by the absolute and relative spatial or physical distances between economic actors (Boschma, 2005). In previous research, it has been claimed that spatial concentration could lead to enhanced knowledge development. Close distances make information contacts and exchange of tacit knowledge easier, and the opposite - larger distances - makes such transfer more difficult (Howells, 2002).