It is no coincidence that so many high-tech firms locate near each other in California’s Silicon Valley or North Carolina’s Research Triangle; these firms benefit from the ability to draw on sufficiently large pools of skilled labor and other resources, while sharing ideas and information in mutually beneficial ways.13 A single, isolated firm would not likely be as productive.
Thus, scale economies can arise in the development of knowledge centers, like research universities, or in the building of large-scale infrastructure, like a national highway system.14 For example, India’s IT industry is clustered in certain regions, such as Bangalore,  11  Research by Goldin and Katz (2001) emphasizes the importance of the U.S. high school system in driving the country’s growth during the first decades of the 20th century.