Evolution of specialization with reachable transaction scope based on a simple and symmetric firm resource allocation model

In the last decade, as an emerging transaction measure driven by computer and internet technology, e-commerce experienced explosive growth in many areas. It has greatly broken down the limitations of space and time to economic activities, thus changing the rules of business fundamentally. Significant work has been done to understand the laws of e-commerce from multiple dimensions, but the question of how e-commerce shapes firms' specialization and market structure from the perspective of spatial factors remains obscure. In this paper, we propose a simple and symmetric firm resource allocation model with a specialized-economy production function and market size constraint, to investigate how individual firms adjust resource allocation with reachable transaction scope expanded. It is shown that with the expansion of reachable transaction scope, individual firms discretely take back one unit resource from a low-investment direction and, instead, channel it to a “specialized direction”. Meanwhile, at the macro level, an optimal division network evolves from a static self-sufficient stage to a diverse semi-specialized stage, and finally to a highly integrated completely specialized stage. Ergo, a Complex Adaptive System (CAS) based simulation framework is constructed. Designed simulation experiments are carried out and confirm to the analysis result of our proposed model.