Extract

Pierre Desrochers and Samuli Leppälä Whether specialization or diversity of economic activities should be a regional development policy goal is a long-standing debate (Rodríguez-Pose and Crescenzi, 2008). On the one hand, as Hoover and Giarratani (1984, chapter 12, non-paginated) observed in their classic textbook, regional economic diversification has long been viewed as a ‘“healthy” structural feature worth striving for’ although ‘the grounds for this view . . . have never been clearly articulated’. In their opinion, this case can ultimately be traced back to the assumptions that ‘a region with a diversified structure (many different kinds of activities and an absence of strong specialization) is necessarily less vulnerable to cyclical swings of general business conditions and demand’ and that multiple employment and investment opportunities create more opportunities for workers, entrepreneurs and investors, thus providing ‘a better chance for new kinds of business to get a start and to survive the hazardous years of infancy’. In the last two decades, however, Michael Porter’s (1990) influential cluster-based prescription managed to successfully reorient most local development officials’ goal towards regional specialization. More recently, the continual decline of poorly diversified regional economies once again reminded numerous policy makers of the dangers of putting all of one’s economic eggs in the same basket (Chapman, 2005). While the benefits derived from the geographical concentration of related firms are strong, our objective in this chapter is to expand upon the traditional arguments made on behalf of economically diversified regions by illustrating how such a setting inherently facilitates the...