Using system dynamics to evaluate policies for industrial clusters development

https://doi.org/10.1016/j.cie.2020.106637Get rights and content

Highlights

  • Provides a model for the development of industrial clusters.

  • Provides a list of influencing factors of industrial clusters development.

  • Examines the effects of different policies by applying System Dynamics approach.

  • If the intended policies apply, the cluster will become bigger and grow faster.

Abstract

Clusters are a suitable method for creating competitive advantage, not only for enterprises of the same cluster, but also for the country on which the clusters are based. In this regard, development of industrial clusters has been considered in most of developed and developing countries. Accordingly, the present study was carried out to provide a model for development of industrial clusters and to investigate the effects of different policies by applying System Dynamics (SD) approach. The proposed conceptual model includes cluster size, interaction of the clusters with the suppliers, staff, internal and external market demand, production capacity, training and research institutions, investment, etc. Considered policies include strategies of the firms such as increasing the utilization of production capacity, reducing lead time as well as national and international policies, such as granting low-interest governmental loans, sanctions cancellation, etc. Results of the study showed that, if the intended policies are applied, the cluster will become larger and grow faster.

Introduction

Nowadays, Small and Medium-sized Enterprises (SMEs) play vital roles in most countries involving various aspects of the economy, including manufacturing and services. Indeed, these enterprises are major providers of employment, evolution, and innovation, as well as the pioneers in novel technology inventions (Babkin, Kudryavtseva, & Utkina, 2013). Accordingly, development of SMEs facilitates domestic development of the country and accelerates industrial growth. Despite the significant presence of SMEs in Iran, such enterprises face numerous challenges due to common approach applied in policymaking, regardless of the scale of production units. Therefore, SMEs fail to play the expected roles as in developed countries (Iran Small Industries & Industrial Park Organization, ISIPO, 2014).

Industrial clusters are known as one of successful organizing patterns of SMEs, which eliminate weaknesses of the SMEs and reinforce various advantages of a small business, such as flexibility and diversification (Lin, Tung, & Huang, 2006). Today, planning for development of the SMEs, based on clustering approach is considered as a method to achieve developmental goals in many countries. Although, industrial clusters have a high potential for ongoing economic growth, their development is still a major challenge (Karaev, Koh, & Szamosi, 2007).

Normally, the enterprises are influenced by the evolution occurring inside a cluster. However, the effects of many factors should be considered in a clusters' developmental plan and it is important to determine such factors, or variables (Danesh Shakib, Toloie Eshlaghy, & Alborzi, 2017). As several appropriate scenarios can be launched and better practical plans can be executed, existing potential in the cluster can be harnessed effectively in favor of the stakeholders’ interests, contributing to sustainable development. Thus, the relationships among the influential factors should be organized for the success of industrial clusters by a suitable structure resulting in the creation of a coherent model with clear interaction among the factors. Therefore, the present study aims to present a quantitative model for development of industrial clusters. For this purpose, variables influencing the development of industrial clusters including cluster size, interaction of the clusters with the suppliers, staff, internal and external market demand, production capacity, training and research institutions, etc. are represented in a dynamic model. Then, the effects of different policies are evaluated on development of industrial clusters that are vital to the industrial and national competitive advantage.

Briefly, the present study was conducted aimed at providing a model to solve the problem associated with the lack of development in SMEs in Iran, as well as industrial clusters in underdeveloped countries in general. Also, it was attempted to improve the expansion of developed clusters. For this purpose, the factors influencing the development of industrial clusters were identified and listed by reviewing previous researches and interviewing with the experts such as experienced managers in industrial clusters and SMEs, along with prominent university professors working in this field. Therefore, one of important objectives of this study was providing a comprehensive list of factors which could influence the development of industrial clusters. Since, these factors could interact with each other and also increase or decrease the development of industrial clusters in the long-term, determining the relationships among these variables was the next objective of the present study. Finally, a comprehensive dynamic model was defined for development of industrial clusters, which is capable of evaluating different scenarios of industrial clusters and taking a possible and positive step in this direction considering these factors and their relationships. Accordingly, the objectives of the present study were as follows:

  • A.

    Identifying the factors influencing the development of industrial clusters;

  • B.

    Providing a dynamic model for development of industrial clusters;

  • C.

    Investigating the behavior of the major variables in the model; and

  • D.

    Analyzing decision-making scenarios through simulating the behavior of the mentioned variables.

The rest of the paper is organized as follows: The second section involves the background and review of the related literature. The third section describes the research methodology. Next, the dynamic model for development of industrial clusters is represented in the fourth section. Further, the fifth section discusses the results of simulation and investigates the behavior of reference modes and evaluates model validations, as well as some scenarios and sensitivity analysis. Finally, conclusions and suggestions are offered in the sixth section.

Section snippets

Literature review

Three sub-sections were presented in order to arrange the review of the related literature in various aspects, and to convey the supporting structure more clearly.

Methodology

In general, simulation is a process of designing a model based on a real system (Banks, Carson, Nelson, & Nicol, 2004), which is used when it is not possible to apply analytical techniques because of system complexity. Simulation is done with the aim of providing the models that are close to reality as much as possible (Sokolowski & Banks, 2009). Thus, the systems are studied through the simulation. Further, System Dynamics (SD), as a methodology and mathematical modeling technique is used to

Research model

The dynamic model, CLDs as well as Stock and Flow diagrams are provided in this section for development of industrial clusters considering the SD modeling steps.

Results and discussion

Variables were defined, their relationships were identified and conceptual model including causal-loop and flow diagrams were designed and validated in accordance with the SD modeling steps. The data were obtained from the ISIPO, for the Tehran's Furniture Industrial Cluster in order to run the simulation model.

In this section, the results of the simulation and validation of the model will be presented. Furthermore, the sensitivity analysis and different policies will be discussed.

Conclusions

Clusters are a method used for creating competitive advantage, not only for the enterprises in that cluster, but also for the country where the clusters are formed. So, development of industrial clusters could be among the programs in both developed and/or developing countries. Although, many studies have focused on the cluster development, enterprises' strategies for their development, and also governmental policies to facilitate them, the present study did not focus on the effect of only one

Authors’ contributions

The present paper has one author. So, all Sections including Literature Review, Methodology, Research Model, Results and Discussion is done by the corresponding author.

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