Market relatedness and local export dynamics: Evidence from China.

The evolutionary economic geography literature explores the patterns of regional product evolution from the perspective of supply-side relatedness, leaving behind the role of demand-side relatedness. Using China's international trade data, this paper measures product-scale market relatedness and explores the impact of market relatedness on two-fold export dynamics, that is the entry of new products and the opening of new overseas markets. Our results show that the entry of new products may be driven by two kinds of power (supply-side relatedness and demand-side relatedness) at the same time. New products with strong market relatedness to locally-available products are more likely to enter the city's production network. However, strong market relatedness between products may result in path locking in overseas market expansion. In terms of mechanisms, product entry and overseas market exploitation are conditioned by the degree of the city's market competition and external demand, respectively. • Enrich the understanding of product relatedness from the perspective of demand-side, proposing the concept of market relatedness. • Construct the measuring method of market relatedness by drawing on the probability co-occurrence method. • Market relatedness may have both positive and negative impact on product dynamics. Specifically, market relatedness will promote the locally entry of new products, but hinder the development of new overseas markets. Market competition and external demand play moderating roles between market relatedness and product dynamics. [ABSTRACT FROM AUTHOR]