In the age of outsourcing, it is easy to forget that outsourcing is simply one manifestation of the division of labor. Adam Smith's dictum that the division of labor is limited by the extent of the market has created difficulties when applied to a division of labor among firms (rather than...

Stigler (1951) formalized the Smithian notion that the division of labor is limited by the extent of the market. Bresnahan and Gambardella (1998) make an analytical distinction between two dimensions of market size - the breadth and depth of markets - in terms of the effects on the division of...