Abstract

Information cost and horizontal division firm clustering

Author(s): Cibo Zuo

The way of firm clustering of Small and Medium Enterprise is categorized into horizontal division and vertical division, and horizontal division is the most typical category of firm clustering for Small and Medium Enterprise. But extant theories such as transaction cost and transaction relationship have no power to explain why horizontal division firms cluster at first. Considering information as analytical units and borrowing from informational economics, this article finds that: â—‹1information production and information transfer are the main differences between firm cluster and other market organizations; â—‹2firm cluster is one kind of regulation arrangement which can reduce information cost.