Conditions for emergence of clusters in the market of monopolistic competition: an institutional approach

Theoretical bases of economics and management

We have developed a concept on the nature of cluster formation as a specific type of organizational structure based on the choice of an alternative mechanism that, by strengthening infrastructural links, can reduce transaction costs in the exchange of ownership rights for various specific assets. We have proposed a generalized classification of market structures operating in the market of monopolistic competition from the standpoint of institutional approach, with the cluster considered as an alternative form of market organization. We have presented a generalized model of formation of infrastructure links between organizations in a competitive market. The classification of specific assets used by market entities has been considered. The variety of organizational forms of business has been explained from the standpoint of choice of mechanisms aimed at reducing the transaction costs that arise in the process of creating and running the business. We have considered the transactional basis of activity and the types of contracts used by the subjects of market relations. The article clarifies the place and role of the cluster in the development of market relations and also examines the institutional prerequisites for its genesis. The criteria for cluster formation have been analyzed. The concept of forming clusters as organizational structures of market relations has been presented. The cluster is considered as a specific form of market relations allowing to achieve maximum market power by reducing transaction costs of infrastructure connections. Notably, using infrastructure links is an exchange of powers for specific assets by implementing various types of transactions. We have considered generalized types of institutional rent. At the same time, reducing various types of infrastructure costs forms a separate type of institutional rent: infrastructure rent. Extracting monopoly revenue from using infrastructure rent is regarded as the main prerequisite for emergence of clusters in the market of monopolistic competition. We have presented the conditions in which the boundaries of activity of organizational structures form in the market of monopolistic competition. We have examined the general conditions for the exchanges allowing to better understand the origin of clusters, as well as to offer a methodological basis for further analysis of their economic activities in various sectors of economy.