Regional embeddedness, relatedness and inter-regional linkages among less developed regions in Central Europe

This paper aims at a comprehension of existing intra-/inter-regional production flows in a dynamically transforming, export-oriented economy in Central Europe. Drawing on evolutionary economic geography combined with input-output approaches, we have assessed the sectoral compositions and relationships between regions from a buyer-supplier interactions perspective. Inspired by contemporary literature we applied concepts of regional embeddedness, relatedness and vertically related variety. Conceptually we argue that the degree of embeddedness of regions is differentiated and spatially non-random. The differences will depend to a large extent on the economic characteristics and on the ability of key actors and institutions in these regions to respond actively to changing opportunities and threats. Empirically we have found: that economically more developed regions are relatively more embedded in terms of production flows and have greater sectoral variety, whereas regions with high export-dependence are economically backward, and have higher concentration of industry and negative associations with innovation activity and overall innovation potential. The intensity of interregional production flows increases as the regional economies vary more from each other, but beyond a certain level of structural difference the rate of mutual flows decreases; and that the intensity of interregional relations depends on the relatedness of the economic bases.