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The organization innovation of the “pin” (we call them nails now) factory that Adam Smith discussed in The Wealth of Nations was the division of labor. Smith argued that the division of labor allowed countries that had division of labor to become richer than those that did not.
Smith believed that the major innovation of the pin factory was division of labor. Division of labor occurs when each person does a specific, small task over and over. This is in contrast to a system in which one person does a larger task. In the context of the pin factory, the various workers were not each making a pin from start to finish. Instead, one person spent all his time straightening the wire, another cutting the wire, a third putting a point on one end, and so on. Smith argued that this innovation made it possible for the men to produce together much more than they could have produced if they had each been making entire pins on their own.
Smith argues that the division of labor makes societies richer. Because people can make so much more when they divide the labor between them, a society in which the division of labor is advanced will be much more productive than other societies. Therefore, the society with division of labor will have many more goods that can be enjoyed by its people.
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