During the growth stage, many firms enter the industry and want to connect to the industry network. The bidirectional relationship between capabilities and network position gives way to a process of network growth through preferential attachment, in which firms with superior capabilities come to be centrally located in the network. The new links that are added to the network might have a relatively strong tendency to be local, to be concentrated in a cluster. Because uncertainty is still high and the nature of knowledge remains considerably tacit, geographical proximity is especially relevant for knowledge exchange between firms (AUDRETSCH and FELDMAN, 1996; COWAN et al., 2004). Tacit knowledge flows most easily through the mobility of people, which is likely to take place locally, or through repeated interaction among people, which is eased by geographical proximity as well. In addition to this direct effect, an indirect effect of geographical proximity may also stimulate local clustering. The uncertainty that is associated to the emergence of a new industry can be partly compensated for through social proximity – and the associated presence of trust – which are likely to coincide to a considerable degree with geographical proximity.In conclusion, the growth stage of the industry life cycle coincides with stabilizing patterns of interaction in the industry network as well as with stabilizing patterns of spatial clustering. This does certainly not imply that the evolution of networks and the evolution of clusters automatically and completely coincide.Although mechanisms of geographical proximity cause a bias of network links to be locally concentrated in clusters, dense and stable parts of the network need not show overlap with established clusters. As a consequence, in addition to clusters characterized by a dense local network structure, there might exist clusters without strong local knowledge-based interaction, as well as stable and dense parts of a network that are dispersed over various geographical locations.