OPEN ACCESS TEL Transaction Cost, Specialization and Division of Labor —A General Equilibrium Analysis of Entrepreneurship under Globalization

Copyright © 2014 Ke Li. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. In accordance of the Creative Commons Attribution License all Copyrights © 2014 are reserved for SCIRP and the owner of the intellectual property Ke Li. All Copyright © 2014 are guarded by law and by SCIRP as a guardian. This paper develops a Walrasian general equilibrium model based on transaction cost and specialization to in-vestigate the evolution and role of entrepreneurship in a competitive market under globalization. The implica-tion of our model is straightforward that if the entrepreneurship in a competitive market under globalization is efficient, it will ensure the network and effects of division of labor can be fully exploited when the gains from the division of labor outweigh the costs of exchange between individuals of different specialization patterns with the different fixed learning costs. Hence, the entrepreneurship service in a competitive market under globalization can promote aggregate productivity by enlarging the scope for trading off network effects of the division of labor on aggregate productivity against transaction costs. To business practitioners, this model suggests that the en-trepreneurship service is a key element of business viability during which a major transition took place in hu-man activity. Besides, the improvement of the level of globalization and the general transaction efficiency coeffi-cient will increase the level of division of labor and the per capita real income level of participants