A Simulation of Entrepreneurial Spawning

This paper describes how patterns of industrial clustering arise with respect to the size of an initial firm when measured in terms of innovation. Through principles of evolutionary economics, the aim of this paper is to examine the ‘birth’ of industrial clusters. We take an endogenous and supply-side approach, where firms in a region spawn from incumbents. Technology is qualitatively described using a code set mapped on a cognitive space. Assuming inheritability of networking skills, we seek to model how the size of an initial firm influences future patterns of cluster formation through a model of technical cognition and a mimicking of creativity. It is found that initial firm size has a lasting impact on clustering patterns through its influence on the level of cognitive distance of the underlying agents. The model replicates the stylised facts of entrepreneurial cluster formation.