FIW Policy Brief No. 27: Smart Diversification in Trade

Smart Specialisation Strategies (3S) are a new approach of European industrial and regional policy. Such economic policy measures aim to promote new specialisations on the basis of existing spatially and technologically concentrated competences and strengths. However, as this is primarily about supporting diversification processes, this article uses the term "smart diversification". These strategies build on the use of composite effects (e.g., knowledge spillovers) and indeed play an important role in developing new specialisations in Austrian foreign trade as they provide the basis for cost advantages and unique selling points in the production of certain goods. On the other hand, they also create path dependencies in the development of the export portfolio, which could lead to a long-term structural lock-in. Whether local competences and specialisations based on them are an opportunity or a constraint for further development also depends on research, technology and innovation policy measures aimed at developing existing strengths and linking them with new areas of knowledge or technology. So it is in the sense of Schumpeter to create and implement "new combinations".