Economies of scale
Increasing returns to scale, and economies of scale, are "internal" to a firm and may allow for the establishment of more of the same firm outside the area or region. Economies of scale "external" to a firm are the result of spatial proximity and are referred to as agglomeration economies of scale. Agglomeration economies may be external to a firm but internal to a region. It is important to note that these increasing returns to scale are a major contributing factor to the growth of cities. Agglomeration economies exist when production is cheaper because of this clustering of economic activity. As a result of this clustering it becomes possible to establish other businesses that may take advantage of these economies without joining any big organization.