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Considers the importance of geographical and institutional factors in the development of clusters and industrial districts as a response to economic integration in the European Union (EU). Theoretical works by economists, economic geographers and organisational theorists are synthesised to provide a framework for the analysis of the emergence and/or development of the geographical concentration of firms in response to economic integration in the EU. An explanation based on competitive advantages from creating or developing geographical concentration in response to economic integration is proposed. A threefold classification is made to distinguish between different types of industrial geographical concentration – clusters, industrial districts type I, and industrial districts type II. Argues that the main difference between these three kinds of geographical concentration is attributed to the nature of their networks. Finally, the paper illustrates the importance of geographical concentrations for international business by considering a famous Italian industrial district, the ceramic tile industry in Sassuolo.