For an industry, the benefits of locating in a densely peopled and highly industrialized situation, where the market is large, but spatially concentrated. Transport costs are thus low, and specialized industries can evolve, since local demand is high. Further benefits arise because of functional linkages and external economies. See Park (2002) AI & Soc. 16, 3 on a Swedish Science Park which has intensified knowledge generation by facilitating technical innovation, education, and research.

Roos (2005) J. Econ. Geog. 5, 5 claims that the effect of agglomeration economies is over five times larger than the effects of geography, while Viladecans-Marsal (2004) J. Econ. Geog. 4, 5 shows that, in Spain, agglomeration economies influence the location of manufacturing activity. ‘Empirical analyses often find that factor endowments are more powerful in accounting for trade and production patterns than are agglomeration economies, but that both are important’ (Hanink and Cromley (2005) AAAG 95, 3).