Which of the following statements is true of geographical clustering?
A) The proximity of many competitors serving a local market leads to competition that increases their pricing power in their relationships with both buyers and suppliers.
B) Close proximity of firms eliminates the likelihood of a firm's competitors gaining access to the firm's proprietary knowledge.
C) Clustering invariably leads to lower concentration of pollution and inordinately low housing costs.
D) Proximate firms have an advantage in sharing information that can lead to greater innovation productivity.

Question

Quizplus · Accepted Answer

Proximate firms have an advantage in sharing information that can lead to greater innovation productivity. This is because they can easily exchange ideas and knowledge, which can lead to the development of new products and processes. This is one of the key advantages of geographical clustering. Option A is incorrect because competition can actually reduce pricing power, as firms may need to lower prices to compete for customers. Option B is incorrect because proximity does not necessarily prevent competitors from gaining access to proprietary knowledge. Option C is incorrect because clustering can sometimes lead to higher pollution levels and higher housing costs, particularly in areas where demand for housing is high.

Which of the Following Statements Is True of Geographical Clustering