What Advantages Do Firms Gain from Being Located in an Industrial District?

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What advantages do firms gain from being located in an industrial district? Introduction Before addressing this question it is important that we gain an understanding of the concept and history of an industrial district, we will start by outlining its interpretation and key features. We will then discuss the timeline of its emergence and decline, then rise again in the late twentieth century. Next, we will address the essay question and go on to discuss the advantages firms gain by being located within them. The success of a firm depends on many factors such as the culture and environment of the firm, the employer – employee relationships, nature and quality of workforce, cost of production etc. These are all factors we will take into consideration in this essay. What is an Industrial District? Fig 1 - Marshallian Industrial District, Markusen (1996) Fig 1 - Marshallian Industrial District, Markusen (1996) There are many different interpretations offered for the term in modern business studies and industrial economics. But for the purpose of this essay we will adopt one of the earliest and well-recognised offered by economist Alfred Marshall (Belussi and Caldari 2008). In the early twentieth century, Marshall noted that there was two ways in which the manufacturing industry could be organised. The first was as one big enterprise with production all under one roof and the second was as a ‘concentration of specialised industries in particular localities’ (Marshall 1922), and this was what he referred to as an industrial district. He described it as a region where the business structure consisted of small local firms making local investment and production decisions. There was considerable amount of trade between buyers and sellers within the district, but business with outside firms was very minimal (Sheppard and Barnes 2003). According to Marshall, the

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