Industry clustering and its impact on society

The readings this week described the phenomenon of cluster development, and I was left thinking about Silicon Valley, where I went last summer to intern. So technically, clustering is the phenomenon where companies from the same industry are located quite close to each other. Silicon Valley is perhaps the best well known example. A large cluster of technology companies spanning from San Francisco till San Jose. There are many other examples are well. Like the financial district in downtown Manhattan having financial tech companies, or the Napa wine producing region north of San Francisco etc. So, how exactly are these clusters advantageous for the society? Companies within the cluster benefit the most, since now they can attract a large pool of skilled talent to move near that cluster and work for these companies. It is also good for skilled workers since they can switch companies without any relocation hassle. Some of these clusters are also based around a prestigious university (like Silicon Valley around Stanford), which keeps the talent pool refreshed. Clusters are also beneficial for new startups since a lot of the infrastructure required for companies to thrive is already present before they arrive. Also, since knowledge of state of the art technologies can be easily shared since firms are close by (like via conferences etc.), it helps in increased rates of innovation in the industry. For some companies, if there is a firm producing a certain product which they consume as their input in the same cluster, then this reduces costs like transportation etc. to a large extent. With clusters, a lot of different secondary businesses also sprung up nearby, like restaurants, grocery stores etc. which help provide more jobs and employment in the area. On the other hand, clustering does have disadvantages as well.  The price of housing and several other services increase in the area of the clusters. We all are aware about the exorbitant housing prices in San Francisco in California and Manhattan in New York. This leads to people shifting their homes slightly outside the clusters and this increases commute time, leading to a worse quality of since less time is left to devote to leisurely activities. This may also lead to the displacement of the native people, who lived there before the cluster formation, to a different location which is cheaper. All in all, I think industry clusters are quite beneficial for the society and its progress.