The Cluster as Market Organization

The many competing schools of thought concerning themselves with industrial clusters have atleast one thing in common: they all agree that clusters are real life phenomena characterized bythe co-localization of separate economic entities, which are in some sense related, but not joinedtogether by any common ownership or management. So hierarchies they are certainly not.Yet, it is usually taken for granted that clusters, almost regardless of how they are defined, allexpatriate the 'swollen middle' of various hybrid 'forms of long-term contracting, reciprocaltrading, regulation, franchising and the like' residing somewhere between hierarchies andmarkets. This fundamental (but usually implicit) assumption would, perhaps, be justified ifmarkets could be reduced to events of exchange of property rights, between large numbers ofprice-taking anonymous buyers and sellers supplied with perfect information as they arecommonly conceived in mainstream economics. One of the original attractions of Neoclassicalprice theory was precisely that it promised a way of analysing the economy in general andmarket exchange in particular independently of specific institutional settings.However, introducing transaction costs as more than fees paid to intermediaries leads inevitablyto comparative institutional analysis and, not to be forgotten, to the perception of markets asinstitutions with specific characteristics of their own. Some sets of characteristics are so commonthat they represent a specific market organization or market form. The cluster is one suchspecific market organization that is structured along territorial lines because this enables thebuilding of a set of institutions that are helpful in conducting certain kinds of economicactivities.