What is the effect of foreign investment into traditional industrial districts? In this paper, we study longitudinal data on an Italian cluster in the textile industry to discuss this research question. We use modelling and computer simulation to present a number of testable hypotheses to underpin a theory of interaction behaviour among sub-populations in industrial districts. Our work was inspired by the lack of empirical research on this research problem, in terms of substitution dynamics. Our findings have important implications both for managers and entrepreneurs who are willing to speculate on industrial districts\u2019 future trends
