This paper explores the possibilities of combining the recently developed 'value constellation' concept and the literature about industrial districts. The advantages related to the geographical concentration of economic activities are insufficient in the competition with companies that are linked to each other within a value constellation - a customer-oriented inter-organizational strategy. This new type of competition forces traditionally operating SMEs in industrial districts to team up with each other in a customer-oriented network. However, these networking strategies are unlikely to emerge because SMEs are locked into their traditional competencies and they lack the financial and strategic resources to develop interactive strategies covering the entire value system. Business associations and local institutions may play a crucial role in changing and shaping the emerging network among the SMEs. However, local institutions are equally susceptible to being locked into traditional patterns of interaction. Their willingness to break away from the past is crucial for the learning capabilities of local SMEs. The difficulties in setting up a customer-oriented network are illustrated by the 'construction and home furnishings' business cluster in South West Flanders (Belgium).