Question What advantages do firms gain from being located in an industrial district? Introduction Before addressing this question it is important that we gain an understanding of the concept and history of an industrial district, we will start by outlining its interpretation and key features. We will then discuss the timeline of its emergence and decline, then rise again in the late twentieth century. Next, we will address the essay question and go on to discuss the advantages firms gain by being located within them. The success of a firm depends on many factors such as the culture and environment of the firm, the employer “employee relationships, nature and quality of workforce, cost of production etc. These are all factors we will take into consideration in this essay. What is an Industrial District? There are many different interpretations offered for the term in modern business studies and industrial economics. But for the purpose of this essay we will adopt one of the earliest and well-recognized offered by economist Alfred Marshall (Belussi and Caldari 2008). In the early twentieth century, Marshall noted that there was two ways in which the manufacturing industry could be organized. The first was as one big enterprise with production all under one roof and the second was as a ˜concentration of specialized industries in particular localities' (Marshall 1922), and this was what he referred to as an industrial district. He described it as a region where the business structure consisted of small local firms making local investment and production decisions. There was considerable amount of trade between buyers and sellers within the district, but business with outside firms was very minimal (Sheppard and Barnes 2003).1 According to Marshall, the distinguishing feature of an industrial district was the nature and quality of the internal and highly flexible labour force. Workers were able to move freely between firms and live in the same community as the owners; he stated that ˜the secrets of industry were in the air' (Marshall 1922) suggesting a sense of an industrial atmosphere. There was very little out-migration of workers as the people were committed to the district rather than the firm itself and as a result strong cultural identity and industrial expertise was developed (Alberti 2008). Industrial districts were the dominant form of organization at the time (Sheppard and Barnes 2003). However, after World War Two, there were vast improvements in mass production technologies and this resulted in an increased demand for standardised products, the organizational structure shifted from small firms in industrial districts to large enterprises. This time period was referred to as the ˜Golden Age' because of the sharp increase in economic growth and employability that occurred (Marglin and Schor 1990). A lot of emphasis was put on large scale production, achieving economies of scale and mass producing identical standardized products to keep prices as low as possible. It was almost as if specialized industrial districts had become none existent. Nevertheless, they made a return in the late 20th century. Sociologists Michael Piore and Charles Sabel (1984) referred to this as ˜the second industrial divide'. They found that rising incomes and wealth lead to an increase in demand for high quality bespoke products and large firms focussing on mass production were not tailored to produce these as their production process was not flexible enough. Further technological advances such as being able to adjust the number of products produced by a machine meant that technology could be adapted for small scale productions; industrial districts implemented these in their production processes and were able to produce high quality, specialized goods very quickly (Carnevali 2004). Advantages of Industrial Districts Now that we have gained an understanding of the history and background of industrial districts we will outline the advantages gained by small and medium sized firms from being located in an industrial district. One of the benefits a firm can gain from being located in an industrial district is the sense of community spirit. "˜The quality of entrepreneurship depends on the quality of business culture" (Casson 1993) so it is important that a firm has a good one to be successful. The local people have homogenous values; these values are based on a strong work ethic and mutual benefit which is the survival and success of the industrial district. Shared values which are clearly articulated are very beneficial to both the firm and employees (Kouzes, Posner and Schmidt 2006). Everyone works together as a team towards a common goal. Owners and workers live locally and the values required for the district to survive are