Elucidating the industrial cluster effect from a system dynamics perspective

This study applies the system dynamics (SD) methodology to explore factors affecting the industrial cluster effect, which is crucial in determining national and industrial competitive advantage. A literature review finds few studies that utilize SD to investigate factors affecting the industrial cluster effect. In a global business environment, competition is not just between individual companies and supply chains, but also among companies in regional clusters. The concept of SD, devised by Jay W. Forrester et al, helps mankind realize the variation of a complicated system, and perceive how an internal feedback loop within a system impacts whole system's behavior. This study establishes a dynamic model of various factors of industrial cluster effect through the causal loop diagram also known as the cause-and-effect chain. This study considers four important interactive dimensions of industrial competitiveness: manpower, technology, money, and market flows. This study also constructs a comprehensive causal loop diagram of the industrial cluster effect. All factors in the cause-and-effect chains influence positively the industrial cluster effect. The SD approach is adopted to analyze the complicated relationship of factors affecting industrial cluster effect. The SD approach is more effective than other methodologies.