This paper presents an agent based model of firm location designed to explore the effect of regional policies on the spatial pattern of business activity. New firms are created each period taking into account the sector profitability and entry barriers. Firms choose their location and then they decide sequentially whether change their size or cease their activity accordingly to the profit maximization principle and the limited information they have. Their costs depend not only on the production level and the price of the productive factors but also on the land price. The characteristics of the territory where the firms are located are not static but rather evolve depending on the public policies, demographic variables and the firm localization patterns. The presented model shows endogenous rules of firm localization as well as the effects in the medium and long term of public policies.