Is entrepreneurial talent entirely innate or do people learn to become entrepreneurs? Extend Lucass (1978) model of entrepreneurship to allow for the possibility entrepreneurial talents may be acquired by watching other entrepreneurs in action. This paper implies that areas with more firms have higher average firm productivity. This is confirmed using Italian firm level data. This research paper also show that endogenous accumulation of entrepreneurial talents is a more convincing explanation than heterogeneous entry costs for clusters of firms.