1 Multilevel Analysis of Industrial Clusters: Actors, Intentions and Randomness (AIR) Model Ozge Dilaver Centre for Research in Social Simulation (CRESS) University of Surrey Guildford GU2 7XH, UK British Institute at Ankara, Tahran Caddesi 24, 06700 Ankara Turkey Elvira Uyarra Manchester Institute of Innovation Research (MIoIR), Manchester Business School, University of Manchester, Oxford Road, Manchester M13 9PL, UK Mercedes Bleda Manchester Institute of Innovation Research (MIoIR), Manchester Business School, University of Manchester, Oxford Road, Manchester M13 9PL, UK Abstract: Existing literature on industrial clusters indicates a symbiotic relationship between innovation and geographical concentration of firms working in similar industries. Innovative processes require different forms of knowledge and expertise, which are distributed across individuals and organisations at different levels of industrial clusters. In this chapter, we present fundamental extensions to the SKIN model (Ahrweiler, Pyka and Gilbert, 2004) for representing such multi‐level interactions. We introduce individual actors in addition to firms as agents. These agents are placed in a two‐regions environment that simulates evolution of two competing regions. We also integrate elements of intentionality in addition to randomness in our model. Through subjective assessments of their managers, firms investigate and design research projects. These extensions help opening up the black box of the firm and relate firms to active and creative agency of individuals in starting up new firms, establishing their research objectives and creating new knowledge. Within this broad range of issues we focus in this chapter on the role of entrepreneurship to illustrate how the extended model can be used. In experiments focusing on entrepreneurship, we generate the relative success of Silicon Valley in comparison to Boston in silico. “When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas. And presently subsidiary trades grow up in the neighbourhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material” (Marshall, 1920, Book IV, p27).