"To take an example...from a very trifling manufacture...the trade of the pin-maker. [I]n the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head...and the important business of making a pin is, in this manner, divided into about eighteen distinct operations...Ten men only were employed [and they] could make among them upwards of forty-eight thousand pins in a day...But if they had all wrought separately and independently [they] certainly could not each of them have made twenty, perhaps not one pin in a day..." (Book I, Chapter 1).

The master gun-maker–the entrepreneur–seldom possessed a factory or workshop...Usually he owned merely a warehouse in the gun quarter, and his function was to acquire semi-finished parts and to give these out to specialized craftsmen, who undertook the assembly and finishing of the gun. He purchased materials from the barrel-makers, lock-makers, sight-stampers, trigger-makers, ramrod-forgers, gun-furniture makers, and, if he were engaged in the military branch, from bayonet-forgers. All of these were independent manufacturers executing the orders of several master gunmakers...Once the parts had been purchased from the “material-makers,” as they were called, the next task was to hand them out to a long succession of “setters-up,” each of whom performed a specific operation in connection with the assembly and finishing of the gun...the jiggers...the barrel-strippers...the hardeners, polishers, borers and riflers, engravers, browners, and finally the lock-freers, who adjusted the working parts," (pp.192-193).

“The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism," (pp.192-193).

“A firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm,"

“It should be noted that most inventions will change both the costs of organising and the costs of using the price mechanism. In such cases, whether the invention tends to make firms larger or smaller will depend on the relative effect on these two sets of costs. For instance, if the telephone reduces the costs of using the price mechanism more than it reduces the costs of organising, then it will have the effect of reducing the size of the firm,"

"If one considers the full life of industries...Young industries are often strangers to the established economic system. They require new kinds or qualities of materials and hence make their own; they must overcome technical problems in the use of their products and cannot wait for potential users to overcome them...These young industries must design their specialized equipment and often manufacture it, and they must undertake to recruit (historically, often to import) skilled labor. When the industry has attained a certain size and prospects, many of these tasks are sufficiently important to be turned over to specialists," (pp.190).

"When the industry has attained a certain size and prospects, many of these tasks are sufficiently important to be turned over to specialists It becomes profitable for other firms to supply equipment and raw materials, to undertake the marketing of the product and the utilization of by-products, and even to train skilled labor," (pp.190).

"And finally, when the industry begins to decline, these subsidiary, auxiliary, and complementary industries begin also to decline, and eventually the surviving firms must begin to reappropriate functions which are no longer carried on at a sufficient rate to support independent firms," (pp.190).

"The division of labor is not a quaint practice of eighteenth century pin factories, it is a fundamental principle of economic organization," (pp.193).