In this paper the literature on industry clusters as a response to local collective failure is reviewed as a way of enhancing knowledge about how failure of food value chains to perform efficiently can be analysed and overcome. The conclusion is that there is much in the local collective failure literature that assists in an understanding of, and is consistent with, the concepts of value chain failure, value chain externalities and value chain goods. Four potential areas for enhancing the analysis of value chains by accessing this literature are noted: defining the boundary between chain failure and local collective failure; improving joint action among parties interested in overcoming chain failure; augmenting the processes of knowledge creation and application in value chains; and improving the governance of value chains. The key point is that the ability of local collective or value chain partners to produce chain goods and internalise positive chain externalities depends directly on the nature and intent of the joint action by the partners: will they cooperate or not, and, if they do cooperate, how and to what extent will they do so? These issues of coordination of economic activity and the nature of the relationships between partners go to the heart of governance within both local communities and value chains.