This paper examines the use of tax havens by MNEs located in business clusters versus their non-cluster counterparts. We extend knowledge-based theory to construct a number of empirical hypotheses that are tested using dichotomous choice models. The firm-level dataset covers 21,389 MNEs from 5 OECD countries during the years 2009-2017. We find evidence that MNEs who are part of a business cluster have 14.9 percent to 23.7 percent higher likelihood of engaging in tax haven activity compared to MNEs who are not part of a business cluster. This association continues to hold whilst controlling for other important factors that drive tax haven FDI. Additional insights suggest that technological sophistication and firm size can impact the magnitude of the correlation between MNEs in business clusters and their tax haven activity. The findings of this paper shed more light on the use of tax havens among MNEs, and hold theoretical and managerial relevance.