A Comparative Study of Diversification and Specialization Based on Division of Labor Theory

This study compares the market utility of specialization with diversification using inframarginal analysis method. The results indicates that the success of non-related diversification often takes place in the areas of low specialization and low transaction efficiency, and that related diversification succeeds because of the evident difference of specialization level between the new production and the old. If they are in the same level of specialization, the utility of diversification is less than specialization.