Why wouldn't people association and dissociate into new worker's cooperatives for a variety of reasons? Competition (and therefore innovation) will still exist under market socialism, it just happens that the rewards are distributed to more people, and therefore more people have stake in reducing costs. Hence you'll still have innovation with the aim to reduce costs of production. There will still be profits in the sense of gains in productivity and wealth over the inputs.
There is nothing preventing the workers to unite and make their cooperatives and whatnot, usually they fail.
Except you know the lack of capital and large-scale poverty of the workers due to the monopolization of land, high rents, low wages, etc all of which are caused by state violence. Not to mention subsidies and regulatory favors for the large corporations which can afford expensive lawyers and lobbyists. Yeah, besides all of that nothing is preventing the workers from uniting and forming cooperatives that have a chance.
The areas where cooperatives are most successful are those where monopolization is practically impossible, like farming. Many farmers are unable to get loans and/or insurance from profit-seeking investors and therefore form credit unions and mutual insurance groups. This has been immensely successful for those farmers whom joined.
Without the state setting the rules of the game, I am quite confident that capitalist privilege would be so undermined that cooperatives would be viable alternatives to wage labor, and the bargaining power of labor would match (if not exceed) that of capital.
This is not without mentioning that historically cooperation among workers was outlawed and forbidden by many states.