The nonlinear effect of technological diversification on regional productivity: implications for growth and Smart Specialisation strategies

With a sample of 268 EU regions and with the use of multilevel modelling, we demonstrate that different measures of technological diversification measured as coherence and entropyvariety, have different nonlinear effects on regional productivity growth and that these nonlinear effects work in opposite directions to each other. Our analysis shows that higher regional productivity returns can be found in regions investing both around their existing technological capabilities as well as in more distant knowledge domains. Our findings have significant implications for understanding regional productivity growth processes and the implementation of Smart Specialisation Strategies.