History and Theory of the Growth of the Firm
Firms may develop in a variety of ways. The simplest type of firm conducts a single function to provide an individual product or service from one site. Thus, a firm can grow geographically (production at more than one site), by scale (horizontal integration to produce more of the same product), by scope (diversification into other products) and by function (vertical integration of sequential activities such as production and distribution). As firms grow they often develop legally (additional statutory rights through incorporation) and organisationally (new structures and procedures). Figure 1.1 indicates these various directions of growth and internal development. Growth can, of course, be multidirectional and multinational. It may also be concentrated upon fewer products, functions or sites than previously in a process known as specialisation. Growth can occur by internal initiative within the firm, by acquisition of another company, or by a cooperative venture with another business. Finally, growth can also be negative when firms decide to reduce their activities or ‘downsize’. Indeed, the majority of businesses fail and disappear (sadly the loss of most records makes it difficult to discover why). Finally, most firms begin and remain small (perhaps 80 to 90 per cent of firms in industrialised countries are classified as small or medium-sized enterprises). The principal task of the business historian, therefore, is to analyse why and how a minority of enterprises grow larger.
KeywordsDecision Support System Eighteenth Century Vertical Integration Late Nineteenth Century Management Information System
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