The concept of clustering is familiar for economists and policy–makers. Clusters are widely regarded as sources of regional competitiveness. However, although the concept of clustering is widely used, there is no clear consensus of what actually constitutes a cluster. In this paper, we develop a dynamic cluster concept. This cluster concept places one particular value chain as central. First, on the basis of the literature we describe a number of characteristics for identifying a cluster. Second, we develop a stylised cluster cycle, with states of development, expansion, maturity and transition. The development of a cluster in these states stems from external contingent events as well as the internal dynamic of clusters. This dynamic cluster concept can be used to formulate policy alternatives for the different cluster states. We use the dynamic cluster concept to analyse the shipbuilding industry in the Northern Netherlands. This cluster went through the states of development and expansion and now shows signs of maturation. The cluster is described and possible policies to support it are suggested.