Hot spots are fast-growing geographic clusters of competing firms that have become an important part of the competitive landscape. The authors develop an evolutionary model to contrast hot spot and non-hot spot competitors within the same industry. Initially, agglomeration economies, institutional forces, and managers' mental models create an innovative environment within the hot spot. Over time, these same forces create a homogeneous macroculture that suppresses innovation, making hot spot competitors more susceptible to environmental shocks. The model suggests that the hot spot evolution differs from the overall industry evolution, with the hot spot initially growing faster than the industry but then experiencing declines not felt by non-clustered firms. The authors propose that the initial advantages of agglomeration erode over time, leading to increased costs and reduced innovation. Managers in hot spots become more attuned to local competitors, leading to biased assessments and a focus on imitation. This homogeneity in mental models and institutional pressures result in a collective process of strategic myopia, ultimately leading to insularity and failed attempts at innovation.Hot spots are fast-growing geographic clusters of competing firms that have become an important part of the competitive landscape. The authors develop an evolutionary model to contrast hot spot and non-hot spot competitors within the same industry. Initially, agglomeration economies, institutional forces, and managers' mental models create an innovative environment within the hot spot. Over time, these same forces create a homogeneous macroculture that suppresses innovation, making hot spot competitors more susceptible to environmental shocks. The model suggests that the hot spot evolution differs from the overall industry evolution, with the hot spot initially growing faster than the industry but then experiencing declines not felt by non-clustered firms. The authors propose that the initial advantages of agglomeration erode over time, leading to increased costs and reduced innovation. Managers in hot spots become more attuned to local competitors, leading to biased assessments and a focus on imitation. This homogeneity in mental models and institutional pressures result in a collective process of strategic myopia, ultimately leading to insularity and failed attempts at innovation.