Economies of Common Services:

Through the concentration of firms in a particular industry in a given geographical location, the firms may enjoy certain commonservices.These services include special transport and telecommunication facilities, water, power, publication of trade journals with news and articles of special interest to the firms as well as even special treatment from bankers. Also, a well-organised industry may enjoy excellent marketing arrangements through which it can buy raw materials and sell finished products. All these lead to a lower per unit cost of output in the industry.

Economies of Research and Development:

Another advantage enjoyed by firms in well-organised industry relates to research and development activities. The industry or other institutions may provide these research activities with the result being made available to the firms in that industry. This lowers per unit cost of output produced in the industry.