Question

Provide some reasons as to why firms will cluster in a certain area.

Answer 1

Where several firms cluster, individuals have lots of possible jobs. From public transport to restaurants and theatres, they will share facilities. And when they're near, staff and firms are able to learn more about each other. This is considered the spillover of information.
When finding funding or investment, several organisations in one position build a critical mass of clout. It also increases competition, which drives firms to change.

Professional individuals who function together begin to form networks. In forging and forming these networks, organisations, including universities, play an significant role in facilitating the exchange of information and creating social capital: meaningful relationships. Networks may be either formal or informal, such as research collaborations between universities and private companies.