This study portrays the locational pattern of the new factories started during 1960-70 in Gujarat among its districts. The aspects examined are: shares of incremental industrial activity going to each district, in aggregate as well as at the level of individual industry groups, relationship between initial and incremental shares and association of certain characteristics of districts with their share in new industrial activity. An attempt is then made to identify (i) the trends in spatial diversification of industries (ii) industries which show high/low potential for diversification and (iii) the role of certain district characteristics and institutional efforts in changing the locational pattern. In the short span of a decade covered here, the manufacturing activity has not only shown a high potential for spatial diversification, but has also actually got diversified to a significant extent. Quite a few industrially backward districts have attracted significant shares of new industrial activity; most of the industries have shown considerable locational flexibility and the structure of industries is changing in favor of such industries. Infra-structure is found to be a necessary, but not a sufficient condition for favor of location, but the effectiveness of the efforts of public institutions have further supported the view that there is nothing specific in an area that prohibits industries from going there.