Specialization is not the same as the division of labor

Specialization refers to individual or unit-level choices to focus narrowly on some task or area of knowledge. It can drive economic development, organizational growth, and increases in social complexity, capacity, and heterogeneity. We show that discussions of specialization contain an undocumented but significant ambiguity. It is used interchangeably with ‘the division of labor,’ which is a specific type of group-level coordination process. At least two different coordination processes are consistent with individual-level specializations. In a division of labor, tasks are divided into complementary processes or components. The term specialization also encompasses processes of differentiation, in which units choose tasks that are distinct from each other. Both can produce complementarities where the value of goods increases or decreases depending on what others produce. We show that confusing the two types of coordination can be pernicious because the structural conditions that promote the division of labor are nearly opposite to those that facilitate differentiation. Using computational models, we find that variation in basic social conditions has opposite effects for the two different processes: increasing social density encourages the division of labor and inhibits differentiation and increasing the number of specializations encourages differentiation and inhibits the division of labor. Since specialization is central to economic and social development, there is value in understanding the conditions that foster it, which requires disambiguating these two distinct types of coordination.