As Adam Smith noted, the division of labour is limited by the extent of the market. There are not many specialist rocket scientists, brain surgeons or carrier network architects who can make their living within the economic confines of a small town.
But one could equally state that the division of labour is limited by the extent of the company. A large company making economic profits can afford specialists and can allow them to work with some autonomy - freed from the immediate need to make the next dollar, euro or pound. This is not just a complex way of describing traditional R&D: large companies also do better with large scale product development as well as support services and systems integration, if they are in a somewhat competitive market.
The smaller company may enjoy freedom from group-think and an incentive to innovate, but it is the large company which brings the innovation to the mass market. A number of possible causes have been proposed for this phenomenon, but look to Adam Smith’s insight for the real reason.
