ABSTRACT
Agglomeration economies are the cost savings to a firm that result from the concentration of production at a given location, either on the part of the individual firm or by firms in general (Parr 2002a:718). They are at the heart of any claim that advantage lies in business clusters. This centrality is frequently traced to Alfred Marshall (1923, 1927). The advantages that he suggested firms can obtain from being part of a cluster continue to be cited frequently by advocates of clustering. In today’s terms, Marshall’s agglomeration advantages are the development of an industry-dedicated labour market, opportunities for business specialization and the ability to share technology knowledge and learning. Originally identified in the context of the steam engine and horse-drawn transportation, many continue to view these economies as equally relevant to biotechnology or ‘dot.com’ clusters. The classification of agglomeration has become more complex than offered by Marshall but his ideas remain influential, although less so in his explanation of why business clusters were more a feature of pre-industrial economies and the disadvantages they had for communities dependent on a narrow economic base.
