Regional lock-ins and realities of firm-level diversification

Abstract

This paper provides micro-level evidence of how and why functional lock-ins persist, despite clear articulations of cognitive unlocking at firm, cluster and regional levels. We draw on literature on regional clusters and vertical value chains and consider how their dynamics condition incumbent firms’ efforts to diversify. Empirically, we employ an extended case study and trace diversification strategies of 12 incumbent supplier firms in the automotive industry in Olofström (Sweden) from 2000 to 2022, based on annual reports and 25 interviews. Findings show that regional cognitive unlocking during the 2008 crisis was not sufficient to decrease supplier firms’ dependence on the automotive industry, due to the persistence of functional lock-ins and vertical value chain dynamics.