We study the geographical location of a unionized manufacturing industry under technological externalities. When firms benefit from locating in the vicinity of similar firms, we show that they locate in symmetric, partially asymmetric or single clusters. We examine the effects of changes in the productivity parameters, in the product demand parameters and in the union characteristics. Finally, we explore the possibility of hysteresis in firm location and we analyze the welfare implication of a change in union power. © 2002 Elsevier Science B.V. All rights reserved.