Furthermore, globalization and technological changes are undermining existing competitive advantage, and opening up new opportunities, products, and processes. Competitiveness is based upon the ability of businesses to continually innovate and upgrade. Despite today's communications technology, it is advantageous for a business to be near its suppliers, local customers, and rivals. Such a location spurs innovation in everything from product design and customer service to process technology and the development of skilled workers. It also provides for a quicker transfer of ideas and a larger pool of industry-knowledgeable managers and employees.
Local businesses are very important.
However, the companies selling outside the state, both nationally and internationally, draw wealth into region, and thus support the success of the local businesses. In the industry cluster concept, government plays an important role. However, that role may not be the one traditionally used in support of economic development.