This article focuses on understanding why multinational enterprises co-locate in industrial districts, stressing, unfolding and describing the potential of the local or regional-level agglomerations of people and firms which permits multinational enterprises to obtain additional sources of competitive advantage when properly fit. In order to fulfil this goal, the paper presents an attempt to link the literature of industrial districts and economic geography with that on international business. Three theoretical frameworks are tested in an empirical case. The paper has implications for the two lines of literature and opens up a key debate for the future.