According to Porter's Diamond model, what is a primary reason firms cluster geographically?

Porter’s Diamond model highlights the importance of geographical clustering for firms, and a primary reason for this phenomenon is that it enables firms to enhance their competitiveness based on local conditions. When firms are concentrated in a specific geographic area, they can better leverage local resources, knowledge, and infrastructures unique to that region, which can lead to increased innovation, efficiency, and productivity. This clustering allows businesses to benefit from local talent pools, suppliers, and related industries, thereby creating a synergistic environment that enhances overall competitiveness.

In contrast, while increasing competition in an industry or gaining access to a larger consumer base can be benefits of clustering, these factors are secondary to the foundational advantage of leveraging specific local conditions to boost competitiveness. Sharing resources and avoiding duplication also plays a role but mainly serves as a supporting function to the primary advantage of enhancing competitiveness derived from local dynamics.