Knowledge spillovers, related variety and firm heterogeneity

Economic geographers and regional economists have traditionally analysed the mechanisms driving learning processes and the diffusion of knowledge among local economic actors. During the past decade, the concept of «related variety» has been frequently used to denote an agglomeration force able to explain knowledge-related advantages for firms and geographically bounded productive systems, and which arises from the heterogeneity of local industries. Besides this concept, more recent studies have emphasised the role of firm heterogeneity as an alternative – but not substitute – mecha-nism for knowledge creation and diffusion. This paper discusses the factors driving the emergence of knowledge spillovers within agglomerative spaces, and conducts a critical comparison between the concepts of industrial related variety and firm heterogeneity as two potential sources of local knowledge externalities, and, thus, of local economic development.