  A model is presented of the market dynamics to emphasis the effects of
increasing returns to scale, including the description of the born and death of
the adaptive producers. The evolution of market structure and its behavior with
the technological shocks are discussed. Its dynamics is in good agreement with
some empirical stylized facts of industrial evolution. Together with the
diversities of demand and adaptive growth strategies of firms, the generalized
model has reproduced the power-law distribution of firm size. Three factors
mainly determine the competitive dynamics and the skewed size distributions of
firms: 1. Self-reinforcing mechanism; 2. Adaptive firm grows strategies; 3.
Demand diversities or widespread heterogeneity in the technological
capabilities of different firms. Key words: Econophysics, Increasing returns,
Industry dynamics, Size distribution of firms
