In an automobile cluster, some firms make steel, some make tyres, and some make car seats. All these products are then purchased by another firm that assembles the car. The industries in the cluster source raw materials from the small and medium enterprises nearby.

Which of the following characteristics is/are discussed in the above scenario?

Geographical proximity of small and medium enterprises

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Sectoral specialisation

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Close inter-firm collaboration

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Supportive regional and municipal governments

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Solution

The correct option is C Close inter-firm collaboration
Industrial clusters are groups of firms in a defined geographic area that share common markets, technologies, and skill requirements. The firms in the cluster collaborate and compete with one another at the same time. By collaborating, they can expand their capacity and also learn from one another. In Tamil Nadu, there are various clusters like automobile cluster, textile cluster, IT cluster, etc.

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