External economies refer to the benefits that firms experience due to factors outside their own operations. These advantages arise when an industry grows in a particular area, leading to shared resources, skilled labor, and improved infrastructure. For example, when many technology companies cluster in a region, they can share suppliers and attract talent, reducing costs and increasing efficiency. These economies can enhance competitiveness and innovation. As firms benefit from a skilled workforce and specialized services, they can focus on their core activities. This phenomenon often leads to increased productivity and economic growth in the surrounding community, creating a positive feedback loop for the industry.