Cluster theory

Cluster theory is a theory of strategy.

Alfred Marshall, in his book Principles of Economics, published in 1890, first characterised clusters as a "concentration of specialised industries in particular localities" that he termed industrial districts.

The theory states that concentrating industries in specific regions creates several advantages. For one there is less competition occurring and thus higher profits to be earned by firms. The steady presence of an unchanging customer base guarantees their business and steady income. The steady presence of suppliers means low costs for the firms as well. Geographic concentration also creates more personable relations that yield better business in all manners.