| Summary: | This research examines the diversification process by conceptualizing a co-evolutionary framework linking production and technology. The study applies the framework to retrospectively explain Korea's successful diversification path and to Viet Nam to identify how the country could further diversify into complex and value-added products. The authors apply relatedness analysis leveraging patent and trade data and present four different types of diversification patterns, namely unrelated diversification, production-based diversification, technology-based diversification, and complex diversification. Developed countries including Korea shifted toward technology-based or complex diversification strategies as their economies developed. Using a simulated scenario approach, the report outlines potential future trajectories wherein Viet Nam attains technological capabilities. The result shows that Viet Nam can diversify into 233 products if it accumulates capabilities in the 12 identified technologies. The report concludes with policy lessons that could inform policy makers in Viet Nam as well as other developing economies. Namely, that the country would need to invest more intensively in technology and capabilities upgrading to diversify into new complex products and evolve its diversification strategy alongside its economic growth and capability building process
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