Micro-level foundations of relatedness and innovation: The re-alignment of automotive and bicycle industries

The relatedness of two industries is a central concept in economic geography, yet its micro-level foundations within firms remain insufficiently understood. This paper addresses the mico-level through an in-depth qualitative study of firms operating at the intersection of the German automotive and bicycle industries. Given the shared historical origins of these industries, we conceptualise their recent convergence as “re-alignment”. Re-alignment is a long-term pattern of inter-path dynamics in which previously related industries, after diverging through processes of specialisation, reconverge under changing technological and institutional conditions. The paper investigates why and how this re-alignment occurs at the firm level and examines its implications for innovation based on an exploratory research design combining document analysis with expert interviews. The findings reveal a diverse range of innovations emerging from the re-alignment of the two sectors. Automotive firms integrate bicycles into their product portfolios to strengthen brand identities associated with sportiness and sustainability, while also reviving historical connections between automobility and cycling. Bicycle manufacturers adopt production methods and quality standards inspired by the automotive industry in order to improve efficiency and product quality. The analysis demonstrates that re-alignment is facilitated by complementarities in technological capabilities and market strategies, but also constrained by significant structural differences between the industries. By foregrounding firm-level dynamics, the paper contributes to debates on relatedness and inter-path dynamics and advances a more nuanced understanding of how industries reconnect through innovation-driven processes of re-alignment.