Opportunities to diversify regional economies: Lessons for policy from a case study on Hawaiʻi

Many regions of the United States promote diversifying their industrial base as a primary goal in regional economic development strategies but rarely use objective tools to identify diversification opportunities and priorities. In this article, we summarize a case study using a novel approach to identify opportunities to diversify Hawaiʻi’s economy and discuss the wider policy implications of this approach for other regions. To explore diversification in Hawaiʻi, we apply the Principle of Relatedness, which predicts regional diversification patterns. We specifically focus on industries that are related because these have a higher probability of thriving. But to diversify, we look for new industries that are currently underperforming. The case study highlights the difficulty of diversifying and the challenges that are likely to face new industries, often requiring a significant policy response to be overcome.