Sample Economic Clusters Discussion Paper

Economic Clusters- Discussion

The most surprising concept I learned in the chapter is that firms competing for customers are often located close to one another rather than being far apart as is the expectation of many people. From the layman’s perspective, to overcome competition, a firm must be located far from its rivals. There is the belief that such an initiative could see it attract specific customers when it is alienated from competitors. The reverse is however true as many competing firms such as financial institutions and carpet producers in states such as Georgia and Los Angeles’s television producers are often located close to one another (O’Sullivan, 2012). One of the reasons for the clustering of firms is the need to share intermediate inputs supplied by a specific firm. For example, dress and button-making firms are often located close to one another as they share intermediate inputs. Also, high-technology firms are located close to one another as they share the suppliers of intermediate inputs including electronic components. The close location to one another and the suppliers enables these firms to access and tap the required facilities or inputs quickly.

The U.S. hospitality and tourism cluster, for instance, formed as a result of the need to offer natural features and an attractive heritage. Thus, several hotels or resorts are located or concentrated in urban areas or sites that offer natural features and are appealing to customers. It is highly likely, for instance, that a hotel that is located far from other hotels in an area with none of these aspects will attract fewer customers, unlike those competing within similar locations. An advantage of the hospitality and tourism cluster is high productivity and performance as there is the push to offer unique services to end-users. Also, the proximity of hotels enhances the perspective of innovation (Peiró-Signes, Segarra-Oña, Miret-Pastor, & Verma, 2015). The disadvantage, however, is that lower-segmented competitors in the cluster are likely to benefit more as compared to the higher-segmented competitors.




O’Sullivan, A. (2012). Why Do Firms Cluster? In Urban economics (pp. 46-66). Maidenhead: McGraw-Hill.

Peiró-Signes, A., Segarra-Oña, M. D. V., Miret-Pastor, L., & Verma, R. (2015). The effect of tourism clusters on US hotel performance. Cornell Hospitality Quarterly56(2), 155-167. Retrieved from