Abstract for: Cluster Formation and Government Policy: System Dynamics Approach

This paper studies the effect of particular government policies on a cluster formation using a system dynamics modeling approach. A conceptual cluster dynamic model includes the interaction of the cluster with resources, workers, jobs, unemployment, salary, market demand, and production capacity. The considered government policies are raising the cluster's attractiveness, lowering the failure rate of new firms and enlarging the amount of resources. The results show that the cluster will be developed faster and grown larger if the cluster is attractive and/or when the failure rate of new firms is low. Increase in resources also enlarges the cluster but it takes a longer time to develop.