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The tendency of firms in certain industries to concentrate in areas where there are other firms of a similar type. This enables them to use the services of related industries providing inputs of goods and services, and possibly to gain from the training provided by other firms in a cluster by poaching their skilled labour force. This is held to explain the tendency of industries to concentrate in particular areas, for example Silicon Valley in California, with a high density of electronics and computer-based industries, and the M4 corridor in England. Economic development agencies often aim at the creation of new clusters; this is sometimes difficult to achieve, as it involves simultaneous investment in various industries and forms of technical education.

Subjects: Economics.

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