# Industry Growth Readiness (Product Density Index, PDI)

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<summary>Definition</summary>

This Industry Growth Readiness metric assesses how well-positioned a region is to expand into new industries based on its existing skills and resources. High scores indicate regions with strong foundations for economic diversification and innovation. By leveraging current expertise, businesses and policymakers can identify new market opportunities, strengthen local industries, and enhance economic resilience.

Compared to the other Economic Strategy KPIs, PDI focuses on capacity for future expansion—highlighting industries that can be activated based on existing capabilities and ecosystem strength.

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<summary>Navigation</summary>

The main map displays anonymized business nodes color-coded by sector. In the Industry Growth Readiness module, color reflects the proximity of an industry to the region’s current economic structure:

* Blue = High readiness (strong integration and strategic alignment)
* Red = Low readiness (weaker or disconnected from existing capabilities)

Selecting a business or sector on the map reveals its 6-digit NAICS classification, PDI score, and filters the sidebar visualizations by the city it is located in:

1. Growth Readiness Treemap – Shows the relative size and PDI value of each industry.
2. Positioning Chart (Growth Readiness vs. Specialization) – Plots sectors by Industry Growth Readiness (x-axis) and Advanced Specialization (y-axis), using a four-quadrant analysis to identify strategic positioning.
   1. Top-right (Q1): Thriving sectors – complex and well-integrated
   2. Bottom-right (Q2): Traditional sectors – embedded but less complex
   3. Top-left (Q3): Emerging sectors – complex but less established
   4. Bottom-left (Q4): At-risk sectors – low complexity and low integration
3. Growth Readiness Network Map – Displays how firms are spatially distributed and clustered by density level.

All views are synced, allowing users to explore how prepared a region is to grow into new high-value sectors.

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<summary>Methodology</summary>

The PDI score is derived from how close each unactivated industry is to the region’s current set of active industries, based on global patterns of co-location and capability overlap.

* Presence Matrix Construction – For each city, a binary matrix identifies which industries are currently active.
* Product Proximity Computation – Calculate the relatedness between industries using global co-occurrence patterns (i.e. which industries tend to be found together in cities).
* Density Estimation – For every industry not currently active in the city, calculate how many of its “neighbor” industries already are.
* Scoring – Industries surrounded by many related sectors are assigned higher Product Density Index (PDI) values, signaling higher growth readiness.

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<summary>Calculation</summary>

The density (or proximity) between industries for a given city is computed as:

$$\omega\_{cp} = \frac{\sum\_{p'} M\_{cp'} , \Phi\_{pp'}}{\sum\_{p'} \Phi\_{pp'}}$$

Where:

* $$M\_{cp'}$$= Binary matrix indicating if product p’ is present in city c
* $$\Phi\_{pp'}$$= Relatedness or proximity between products p and p’$$f(x) = x \* e^{2 pi i \xi x}$$

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<summary>Interpretation</summary>

High PDI scores suggest:

* The region is already home to many industries closely related to the target sector
* New growth in these areas would require incremental investment, not a full transformation
* Strong value chain ecosystems already exist

Low PDI scores suggest:

* The industry is disconnected from the region’s existing capabilities
* Entry into the sector would require major investment or new infrastructure
* These industries may offer long-term potential, but carry higher strategic risk<br>

This KPI is ideal for identifying adjacent innovation opportunities, targeting sectors for economic diversification, and prioritizing efforts that will yield the greatest return on existing strengths.

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