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cause it emerged in a city where, there were no any automobile industry exits, it grew rapidly and still growing, as the new investment is coming continuously and new units are being developed.

In this research, it was tried to discover the factors that causes the development of this cluster and its rapid growth.

1.1 SMALL AND MEDIUM ENTERPRISES

“SMEs are a major source of entrepreneurial skills and creativity and contribute to economic and social cohesion. They hold the key to innovation & competition and are also emerging as global players, by participating in worldwide production and supply chains.” (eBusiness guide for SME's, p.8, 2008). This statement focusing, enough on the importance and potential role of SME’s in the economic development.

Definition of Small and medium enterprises differ from country to country, region, sector etc., but concisely SMEs are companies whose number of worker or revenues falls below certain limits. European Union (EU) standardized a Small business, as with 50 employees and the establishment which employs less than 250 employees, is categorized as medium. But US describes Small business with 100 worker, whereas, Medium enterprise as with 500. In Canada a business belongs to manufacturing sector and have near about 100 employees, is categorized as Small enterprise, but for the service sector it is limited to 50 workers. A Medium-sized business in Canada is that, which have fewer than 500 personnel. Another category of business according to headcount is Micro Enterprises, which is most popular in Africa, but now has also been accepted as a separate entity in Europe and limits to fewer than 10 workers (SMEDA, 2010).

In developing as well as developed economies SMEs are much greater in number. In Europe 99% of all firms are SMEs, and about 65 million people are working in them (European Commission, 2003). The Micro and Small Enterprises (MSEs) sector plays an important role in the general industrial economy of the India. It is assessed that in terms of value, the sector accounts for about 39% of the industrial output and around 33% of the total export of the state. This sector employs about 31 million people in 12.8 million SMEs (Indian Ministry of Agro and Rural Industries, 2005). The labor intensity of SMEs is almost 4 times greater than Large Scale Enterprises (LSE), the key advantage of this sector is its employment potential at low capital investment. These figures also represent the other economies in the world. SMEs accounts for 40% to 50% of GDP of the world and about 99% of business numbers globally. (ASI, 2011).

According to SMEDA (Small and Medium Enterprises Development Authority, 16-07-2009), SMEs constitute almost 90% of all the business concerns in Pakistan; employ 80% of the non-agricultural manpower; and their share in the annual GDP is 40%, nearly. But this sector has financial and other constraints too, which need to be addressed seriously, in order to achieve optimum outputs.

1.2 INDUSTRIAL/BUSINESS CLUSTER

The importance of geography in economy was highlighted by Paul Krugman, in his book Geography and Trade (1991). The concept of industrial/business cluster is mainly based on the geography. “An Industrial/business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field”.

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