The basis behind the cluster approach is that firms are more comfortable doing business with other firms in their same cluster.

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The cluster approach emphasizes the importance of a geographic concentration of similar and complementary businesses, which creates a supportive business environment and fosters collaboration, partnerships, and knowledge-sharing between firms. By being close to each other, firms in a cluster can benefit from shared resources, infrastructure, and labor pool, as well as reduce transaction and transportation costs, and increase their competitiveness and innovation capabilities. Furthermore, firms in a cluster tend to have similar customer needs, preferences, and cultural backgrounds, which facilitates their understanding of the market demand and the development of tailored products and services. As a result, firms in a cluster are more likely to trust and rely on each other and prefer to do business with other firms in their same cluster. The cluster approach is centered around the idea that firms within the same geographic region or industry sector tend to have common needs, share knowledge and resources, and develop specialized skills and capabilities. This creates a supportive business environment where firms can network and collaborate, leading to increased competitiveness and innovation. Therefore, it is true that firms are more comfortable doing business with other firms in their same cluster.

The Basis Behind the Cluster Approach Is That Firms Are