Unrelated and related variety within the context of public R&D: empirical evidence from German labor market regions

An increasing number of scientific contributions analyzes the importance of unrelated and related variety for regional knowledge creation. While unrelated variety fosters radical innovations and the creation of regional paths, related variety supports incremental novelties and regional branching. However, so far only little is known about the spatial distribution of unrelated and related variety and the relation between regional characteristics. Public R&D is one important actor of knowledge creation and diffusion and crucially affects regional R&D landscapes. This study analyzes the relationship between public R&D and unrelated and related variety in 258 German labor market regions. We use patent data to estimate unrelated and related variety for each region and describe both varieties' spatial distribution. Our empirical results show that the regional organization of technologically unrelated and related R&D activities differs highly across space. The findings of our spatial regression indicate that regions with universities and polytechnics tend to be characterized by related variety.