History and Theory of the Growth of the Firm

  • Gordon Boyce
  • Simon Ville


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.


Decision Support System Eighteenth Century Vertical Integration Late Nineteenth Century Management Information System 
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Further Reading

  1. Blackford, M.G. (1988) The Rise of Modern Business in Great Britain, the United States and Japan (Chapel Hill: University of North Carolina Press).Google Scholar
  2. Blackford, M.G. and Austin Kerr, K. (1994) Business Enterprise in American History (Boston, Mass.: Houghton Mifflin Co.).Google Scholar
  3. Chandler, A.D. (1990) Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass.: Belknap Press of Harvard University Press).Google Scholar
  4. Fruin, W.M. (1992) The Japanese Enterprise System: Competitive Strategies and Cooperative Structures (Oxford: Clarendon Press).Google Scholar
  5. Hannah, L. (1983) The Rise of the Corporate Economy, 2nd edn (London: Methuen).Google Scholar
  6. Jeremy, D.J. (1998) A Business History of Britain, 1900–1990s (Oxford: Oxford University Press).Google Scholar
  7. McCraw, T.K. (ed.) (1997) Creating Modern Capitalism: How Entrepreneurs, Companies, and Countries Triumphed in Three Industrial Revolutions (Cambridge, Mass.: Harvard University Press).Google Scholar
  8. Morikawa, H. (1992) Zaibatsu: The Rise and Fall of Family Enterprise Groups in Japan (Tokyo: University of Tokyo Press).Google Scholar
  9. Pollard, S. (1965) The Genesis of Modern Management (London: Edward Arnold).Google Scholar
  10. Schmitz, C. (1993) The Growth of Big Business in the United States and Western Europe (Basingstoke: Macmillan — now Palgrave).Google Scholar
  11. Ville, S. and Merrett, D. (2000) `The Development of Large Scale Enterprise in Australia, 1910–64’, Business History, 42 (3).Google Scholar
  12. Wilson, J.F. (1995) British Business History, 1720–1990 (Manchester: Manchester University Press).Google Scholar

Copyright information

© Gordon Boyce and Simon Ville 2002

Authors and Affiliations

  • Gordon Boyce
  • Simon Ville

There are no affiliations available

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