Specialisation – definition

Specialisation takes place when an individual, firm or country produces a narrow range of goods or services and over time develops a comparative cost advantage in producing these goods and services. Specialisation is a fundamental concept in economics and is closely associated with the efficient use of scarce resources. Specialisation is more likely when tasks are broken down and specific roles are allocated – a process called ‘the division of labour’.

However, while providing benefits in terms of efficiency specialisation can create problems when individuals and countries ‘over-specialise’ and produce too narrow a range of goods and services or possess too narrow a range of skills.