140 Analysis on Transaction Cost between the Firms in an Industrial Cluster

As an intermediate organization between bureaucratic organization and market, industrial cluster provides the firms in it with benefit for reducing transaction cost. Based on dividing the transaction cost into endogenous and exogenous transaction cost, this paper further separates endogenous transaction cost into internal endogenous and external endogenous transaction cost and subdivides exogenous transaction cost into market, management and political transaction cost. Then this paper constructs the models of each kind of transaction costs and analyzes the mechanism that how industrial clusters can help firms to reduce the endogenous transaction cost. This paper also proposes some suggestions for governments to help firms in the industrial cluster to reduce transaction cost.