The paradox in the industrial district model is understanding how the divergent tendencies of local competition and co-operation are mediated. Social networks are said to provide mechanisms that regulate inter-firm relations and facilitate the flow of knowledge within the confines of the district. Empirical evidence of this, particularly from the South, is limited. This article draws on the case of the export-oriented surgical instrument cluster of Sialkot in Pakistan. It shows how social networks, based on kinship, family and localness, influence production relations, and how the impact of these interlinked local social networks have changed over time. The economic and social reputation that comes from being local is central to vertical and horizontal inter-firm relations within the cluster. Building social and economic ties with external agents is, however, also becoming important, especially to acquire the technical know-how necessary to remain competitive in global markets.