In this manuscript, we relate regional structural composition—related and unrelated variety—to firm-level productivity in European regions, applying a Cobb–Douglas production function framework and using firm-, industry- and regional-level mixed hierarchical (multilevel) models. Our analyses indicate that regional-related variety has a positive impact on firm productivity in European regions, especially for firms in high-tech and medium-tech regions. These outcomes have implications for European policies on competitiveness as firms embedded in regions without these technological and institutional circumstances are systematically worse off in terms of productivity, and catching-up is not obvious for such regional economies.

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JEL Regional Economic Activity: Growth, Development, and Changes (jel R11), Regional, Urban, and Rural Analyses (jel O18), Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions (jel C31)
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Journal Annals of Regional Science
Stavropoulos, S, van Oort, F.G, & Burger, M.J. (2020). Heterogeneous relatedness and firm productivity. Annals of Regional Science. doi:10.1007/s00168-020-00988-2