Economic development agencies worldwide have eagerly embraced clusters as a strategy to boost local economic development. When implementing cluster-based interventions, one of the main issues encountered by many public sector bodies is that the majority of cluster analysis and measurement techniques only give a partial overview of how they actually operate. Often it is the dynamics of collaboration within a cluster that has the biggest influence on overall success. This paper adopts a system thinking approach to help us understand cluster development and inter-firm collaboration. The outcome of this work was the development of a basic five stage conceptual model that helps explain how a cluster develops, together with the changes in company behaviour and company interaction that might be seen at different stages of this developmental trajectory. Using Scotland as an empirical test case, this article highlights the model and examines the problems associated with the adoption of this approach. This methodological approach was shared with other regions working to support clusters to ascertain the relevance of this approach elsewhere. Overall this paper concludes that the model proves to be a useful tool in assessing the varying stages of a cluster’s development both within and outside Scotland.