External economies of scale imply that as the size of an industry grows larger or more clustered, the average costs of doing business within the industry fall. This may occur due to increased specialization or training of workers, faster innovation or shared supplier relationships.

Following are the types of external economies of scale

1. Transportation and Communication
2. Skilled Labour
3. Facility of Workshop
4. Helping Industry
5. Research and Experiment
6. Banking Facility