Data Science

The aim of this study is to analyse the development of new industrial specialisations and the process of export diversification both at the country and the regional level for the EU countries over time. It examines to what extent these processes show path dependent properties, whether persistent development trajectories can be shifted in order to avoid structural traps and what role related and unrelated diversification play for the economic performance of regions. Overall, the results of this report and its policy implications underscore that Smart Specialisation policies require a smooth coordination of a larger set of diverse policy measures that take into account both the local context and all the involved players rather than a perfect setup of single policies. In particular, the educational system, specialisation patterns in research and innovation, and foreign direct investments play a key role in diversification processes and should be a constitutive element of Smart Specialisation policies.

The development of "green" industries is commonly seen as a necessary even though not sufficient condition for the transition towards ecologically sustainable paths of economic development. It is also a recurrent view that proactive and successful policy action in this domain will not only promote sustainable development but also secure competitive advantage of successful countries in these industries. However, a complex constellation of path-dependencies in systems of production and (negative) externalities constrain the emergence and expansion of environmental technologies. This paper presents evidence that path-dependencies in systems of production have a dual role in the development of new industries. They are not only a source of structural lock-in, but also a potential starting point for new developments. The paper shows that factors causing path dependence in systems of production are also an important source of competitiveness both for all traded commodities and for environmental technology industries. Hence, policies supporting the emergence of industries producing environmental technologies should try to exploit this mechanism. Drawing on this evidence a counterfactual analysis is carried out to investigate potential trajectories of development of the EU 28 countries in the environmental technologies. The results indicate that some countries that up to recent times have been pioneers in environmental technologies may lose their strong position in these technologies. In other countries instead new strengths in environmental technologies have the potential to emerge, as some environmental technologies can draw on untraded interdependencies that have not been brought to full fruition so far.

This study examines the development of the productive structures of the EU using international trade data and methods from complexity theory referred to as the "product space" approach. The results show that the set of products for which a country has already a comparative advantage in international trade is a strong predictor for the type of products in which it will develop a comparative advantage and obtain significant world market shares. This implies that the development of the productive structures of a country is a highly cumulative process and any upgrading is necessarily deeply rooted in current capabilities and industrial specialisation. Complementary factors and competencies have to be built up. This makes it more difficult for countries to change their productive structures. In the light of the results of this study the smart specialisation strategy which the European Commission pursues in its cohesion policy for the years 2014-2020 seems to be well placed to foster the competitiveness of the European Union in general and the European regions in particular. Some caveats however apply.