Theoretical Considerations of Alternatives to Previously Established Path in Regional Development

Abstract:

The article deals with the analysis of research papers in the field of evolutionary economic theory. For the successful development of a region, it is necessary not only to understand the dependence on the previous path, but also to know the conditions and alternatives to departure from it, because the predominant share of countries and regions follows the traditional (or inertial) path, but not the path of innovative development. The factors that keep a region in a «track» are the chains of unforeseen events, the emergence of institutions, increasing return to scale, network effects, and positive feedback. The article shows that to departure from the previously established path is possible through technological innovations, which stimulate the growth in existing industries, and are responsible for the emergence of a new economy. The innovative development path is based on the concept of «creative destruction» — the emergence of new industries as a result of the addition and alteration of existing ones. Strong regions and regions with technologically related industries have greater opportunities for industrial diversification. The practical value of the research is due to the fact that in the conditions of limited resources, when a country or a region follow the old path, the costs for a «turn» are quite high and require scientific arguments. The choice of alternatives to the previously established path depends directly on the industrial structure of a region, existing institutions and norms, available labour force and capital. Regional potential determines what new industries can be created in a region in the future. To find a path away from the previously established path is possible through regional deployment — the process of emergence of a new type of economic activity due to technologically related industries. One of the obstacles is the «portfolio effect” — the desire of a region to create and maintain a certain set of unrelated industries that allow it remaining economically stable under external shocks.