Modeling Business Cluster Life Cycles Using Non-Equilibrium Statistical Physics

The economics literature has substantial empirical documentation on the impact of agglomerative forces in business cluster formation. We introduce a cooperative sequential adsorption model to describe business cluster formation over time based on the spatial concentration of firms from the same industry. This model simulates the growth and decay of a cluster over time on an NxN square lattice under the condition of finite resources. Growth and decay rates are probabilistic functions of the number of sites already containing businesses. Once the resources are exhausted, our clusters either experience a period of temporary renewal consistent with economic theory or undergo a period of decline.