European regions transitioning to green markets: the role of related capabilities and public procurement policies

The sustainability transition remains high on the European policy agenda, with an emerging understanding that focusing on green technologies is not enough to achieve disruptive sustainability. An overall green transformation of current systems of production and consumption also requires market formation processes whereby green markets become viable economic opportunities for regions to specialize in. In this study, we draw on insights from evolutionary economic geography and geography of transitions to understand how regions develop green market specializations. To do so, we investigate two key sets of factors. First, we consider the evolutionary capability development process whereby new specializations emerge from existing related regional capabilities, in a path-dependent way. Second, we account for green public procurement initiatives to capture path-creation efforts in the form of deliberate regional policy directed towards green market formation. Our empirical analysis focuses on European regions in the period 2000–2020. We employ original trademark-based metrics to capture regional specializations in green markets and combine them with patent data to construct relatedness linkages between technologies and markets. Our results reveal that only a few regions were able to develop specializations in green markets. We find that both prior capabilities in related technological domains and markets were positively associated with the emergence of these regional specializations. In addition, we also find that green public procurement was positively associated with the emergence of regional green market specializations. Our findings bear relevance for policy and research alike.