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With a sample of 268 European Union (EU) regions and multilevel modelling, we demonstrate that different technological diversification measures measured as coherence and entropy-variety have different non-linear effects on regional productivity growth. These non-linear effects work in opposite directions to each other. Our analysis shows that higher regional productivity returns can be found in regions investing both around their existing technological capabilities as well as in more distant knowledge domains. Our findings have significant implications for understanding regional productivity growth processes and the implementation of Smart Specialisation Strategies.

The non-linear effect of technological diversification on regional productivity: implications for growth and Smart Specialisation Strategies