Related variety and productivity in the environmental industry: establishment-level evidence from South Korea
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Related variety and productivity in the environmental industry: establishment‑level evidence from South Korea Taelim Choi1 · Jeong‑Il Park2 Received: 6 July 2020 / Accepted: 30 October 2020 / Published online: 10 November 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract The paper investigates related variety’s role in enhancing firm productivity in South Korea’s environmental industry using the 2016 Environment Industry Survey. Results suggest related variety is positively associated with firm productivity. However, it was not significant for every establishment: it did contribute to the increased productivity of small environmental establishments in the service sector and those which perform R&D. Keywords Related variety · Productivity · Environmental industry · Agglomeration
1 Introduction Since Marshall ([1860] 1961) presented the agglomeration economies concept in 1890, it has become the foundation for understanding firms’ and cities’ comparative advantage (Porter 2003). Supply of specialized production factors, local labor market pooling, and sharing of industry-specific knowledge are key to explaining cities’ agglomeration economies (Duranton, Puga 2004). As the global economy has become increasingly knowledge-based, and the interest in knowledge-sharing continues to rise, numerous studies have examined how knowledge forms and spreads in geographically bounded areas (Feldman, Florida 1994; Audretsch 1998), particularly measuring the effects of agglomeration economies arising from knowledge exchanges across diverse agglomerated industries (Feldman, Audretsch 1999; Glaeser et al. 1992; Simonen et al. 2015). Since Frenken et al. (2007) proposed the * Jeong‑Il Park [email protected] Taelim Choi [email protected] 1
Regional Economy Research Division, Incheon Institute, 98 Simgok‑ro, Seo‑gu, Incheon 22711, Republic of Korea
2
Department of Urban Planning, Keimyung University, 1095 Dalgubeol‑daero, Dalseo‑gu, Daegu 42601, Republic of Korea
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T. Choi, J.-I. Park
concept of related and unrelated variety, it has served as a proxy to identify knowledge diffusion between heterogeneous industries and measure city diversity’s economic effect (Aarstad et al. 2016; Frenken et al. 2007; Liang, Goetz 2018). While related variety emphasizes the industrial diversity among different but interrelated industrial sectors in a geographic unit, unrelated variety focuses on the industrial diversity among unrelated industrial sectors. The results on the economic effects of related and unrelated variety on region remain inconclusive. However, several studies have shown that regional growth and innovation are primarily associated with related variety whereas unrelated variety is related to economic stability (Aarstad et al. 2016; Antonietti, Cainelli 2011; Brown, Greenbaum 2017; Frenken et al. 2007). This study seeks to empirically determine the agglomeration effect occurring in different South Korean environmental industries, utilizing the related variety concept. The environm
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