Potential gains from specialization and diversification further to the reorganization of activities

•Provide new insights into the diversification and specialization phenomena.•Measure gains due to division and/or merger processes using non-convex technologies.•Reveal the source of these gains (mix and/or size effects).•From a database of farms, we demonstrate that the division gains outweigh the merger gains.•Given the scope of mix changes, we conclude to more specialization gains than diversification gains.

In economic activities, two main forces guide firm and market structures: specialization and diversification. This paper provides new insights on this topic. We propose measuring gains due to simulated division and/or merger processes of firms. Potential gains come from a reorganization of activities through specialization/diversification and/or size effects. From a database of French farms, our findings demonstrate that even if both processes are beneficial for farming systems, the division gains outweigh the gains obtained by a merger. Moreover, mix changes are more important following a division than following a merger, implying more specialization gains than diversification gains.