Spirit Valley Innovation Networks – Diversification and Related Variety as Drivers of Regional Economic Growth

Abstract: In the framework of clusters and innovation systems, several scholars have mentioned the phenomena of related variety and diversification. Variety in specific has been observed in a number of different industries and agglomerations, but not extensively examined yet. This study tries to understand innovation in the spirit-industry of the cognac region, recently baptized Spirit Valley, and more specifically focuses on local firms’ diversification from traditional cognac production. By this, it points out the generic background of variety and its value for local firms and regional growth. In the past two decades, new and often very successful products have been developed by local firms and have had important impacts on the local and global spirit industry. For this specific industry, the study shows the necessity for combination of different knowledge types and sources to successfully diversify and compete. It also reveals the importance of external inputs for the functioning of the local system. In this sense, it sheds light on the functioning of local innovation and resulting variety in the particular constellation of a newly innovating, but traditional and historic know-how based cluster.