Evolution, Entrepreneurship and Lock-in in Resource-Driven Regional Economies

Resource driven regional economies have experienced significant growth over the past decade due to increasing prices of raw materials such as oil and the need for customized and site-specific technologies to increase production and reduce risk. As a result, significant amounts of human and financial capital have built up in these regions. However, there are few examples of resource-dependent economies using these regional assets to successfully diversify away from their dependence on extractive industries. This paper examines the evolutionary lock-in processes of resource economies and the potential of technology entrepreneurship to help create a more sustainable trajectory. Based on interviews with entrepreneurs, investors, and policymakers in Aberdeen, Scotland and St. John's, Newfoundland, we explore the economic and cognitive processes through which firms both inside and outside the resource industry are locked-in to existing economic trajectories and the ability of technology entrepreneurs to break out of these limitations and diversify into new industries and markets. We find evidence of two types of lock-in: a negative lock-in due to the tight labor market, lack on investment capital for non-resource firms, and institutional inertia as well as a 'positive' type of lock-in where firms are unwilling to take the risks of diversification due to an overabundance of opportunities in their existing resource markets. This paper suggests that there are significant barriers to related-variety based diversification towards clean-tech industries within these economies.