Access to Agglomeration Economies/Links between Industries

Agglomeration economies arise when many industries benefit from being located close to a leading industry and to one another. The key idea is that proximity creates savings — not just for one factory, but for a whole cluster of firms. These savings come from the linkages that exist between different industries.

Linkages mean that one industry's output becomes another industry's input. When such linked industries are near each other, transport costs drop, coordination becomes easier, and specialised services (repair shops, banks, transport hubs) develop around them. All these advantages together are called agglomeration economies. They are a powerful force in determining where industries locate, because they operate alongside other factors like raw materials, power, and labour.

Footloose industries are the exception to the rule of heavy dependence on raw materials. These industries can be located in a wide variety of places because they are not tied to any specific raw material — whether weight-losing or not. Instead, they depend largely on component parts that can be obtained from anywhere. Their production is in small quantities, and they employ a small labour force. They are generally not polluting. The single most important factor for their location is accessibility by road network.