Relatedness, complexity, and regional development paths in Germany: a sequencing approach

Abstract This paper critiques the implementation of the EU's Smart Specialization Strategies (S3), advocating for a deeper analysis of the long-term evolution of regional industrial portfolios. We investigate the changing coherence of these portfolios across 401 German NUTS-3 regions from 1993 to 2018, utilizing skill- and task-based metrics for relatedness and complexity, alongside sequence analysis and optimal matching techniques. We identify various regional trajectory types, enriching the understanding of regional economic development. We find that the majority of regions exhibit a stable coherence of their economic portfolio over time while only a few regions have undergone either more dynamic or fragile development paths. While the selection of priorities in S3 policies is based on the evaluation of the current knowledge base, our findings underscore the importance of historical contexts in regional economic structures, offering insights for enhancing regional diversification strategies and prioritizing capabilities in S3 policy frameworks.