Firms that are in the same industry commonly locate near one another, and examples include
Silicon Valley in California, the Research Triangle in North Carolina, and the Route 128
corridor near Boston. One explanation for this observation is that there are âsynergiesâ
between the neighboring firms, which we can view as positive externalities based on our
study of managerial economics. For example, bioâtech research on cancer conducted at one
firm may stimulate ideas for research on heart disease at a neighboring firm, perhaps as
employees change jobs over time or communicate with colleagues in other companies. Based
on what we know about positive externalities, should local or state governments encourage
the development of such technology centers? If so, please briefly describe a few possible ways
that state or local governments could encourage these firms to locate near one another
Firms that are in the same industry commonly locate near one another, and examples include
Silicon Valley in California, the Research Triangle in North Carolina, and the Route 128
corridor near Boston. One explanation for this observation is that there are âsynergiesâ
between the neighboring firms, which we can view as positive externalities based on our
study of managerial economics. For example, bioâtech research on cancer conducted at one
firm may stimulate ideas for research on heart disease at a neighboring firm, perhaps as
employees change jobs over time or communicate with colleagues in other companies. Based
on what we know about positive externalities, should local or state governments encourage
the development of such technology centers? If so, please briefly describe a few possible ways
that state or local governments could encourage these firms to locate near one another
