Skip to main content
SpringerLink
Log in

How Firms Grow

  • Chapter
Book cover Applied Economics

  • 183 Accesses

Abstract

If small firms are growing in importance, large ones still dominate and this chapter examines their share of economic activity in a range of countries. The motives for firms’ growth are considered, and economies of scale and cooperative ventures are discussed in some detail. A discussion of horizontal and vertical growth is followed by a section on diversification, an examination of internal and external growth, and a review of the growth of medium-sized firms. A survey of research on diversification and refocusing is illustrated by a number of European examples, and the chapter concludes with an examination of the relationship between growth and profitability.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References and further reading

  • August, O. (1997a), ‘Airbus Aims High with Plans for Superjumbo’, The Times, 7 April.

    Google Scholar 

  • August, O. (1997b), ‘ICI Planning Sell-offs to fund £5bn Unilever Deal’, The Times, 8 May.

    Google Scholar 

  • Bank of England (1986), ‘New Issue Costs and Methods in the UK Equity Market’, Bank of England Quarterly Bulletin, 26, pp 532–42.

    Google Scholar 

  • Bhide, A. (1989), The Causes and Consequences of Hostile Takeovers, Unpublished Doctoral Thesis, Boston, Harvard Business School.

    Google Scholar 

  • Bagnall, S. (1995), An Industry that Grows as Others Shrink, The Times 27 December.

    Google Scholar 

  • Brown-Humes, C. (1997), ‘One Third of Staff to go at United Assurance’, Financial Times 4 February.

    Google Scholar 

  • Burt, T. (1996), ‘Lucas Varity to Cut Jobs in £25m Restructuring’, Financial Times 4 December.

    Google Scholar 

  • Burt, T. (1997), ‘Giat Joins in Big Arms Bid’, Financial Times 2 April.

    Google Scholar 

  • Campbell, A. and Alexander, M. (1995), ‘The Search for a Better Fit’, Financial Times, 24 November.

    Google Scholar 

  • Central Statistical Office and Eurostat (1995), UK Business in Europe, London. HMSO.

    Google Scholar 

  • Curphey, M. (1995), ‘Tesco Recycling Centres Will Create 700 Jobs’, The Times, 27 September.

    Google Scholar 

  • Curphey, M. (1996), ‘Human Cost of Revolution Among the Insurers’, The Times, 9 August.

    Google Scholar 

  • Dalgic, T. and Leeuw, M. (1994), ‘Niche Marketing Revisited: Concept, Applications and Some European Cases’, European Journal of Marketing, 28.4: 39–55.

    Article  Google Scholar 

  • Department of Trade and Industry (1996), Small and Medium Size Enterprise (SME) Statistics for the United Kingdom 1994, Sheffield, DTI Small Firms Statistics Unit.

    Google Scholar 

  • Durman, P. (1997), ‘Hanson Value 25 per cent Lower as Four-Way Demerger Finalised’, The Times 12 February.

    Google Scholar 

  • European Commission (1994a) Competition and Integration, European Economy, Brussels, Directorate-General for Economic and Financial Affairs.

    Google Scholar 

  • European Commission (1994b), Enterprises in Europe 3rd Report, Luxembourg, Office for Official Publications of the European Communities.

    Google Scholar 

  • European Commission (1994c), Panorama of EU Industry 1994, Luxembourg, Office for Official Publications of the European Communities.

    Google Scholar 

  • European Commission (1995), Panorama of EU Industry 95/96, Luxembourg, Office for Official Publications of the European Communities.

    Google Scholar 

  • Firth, M. (1979), ‘Profitability of Takeovers and Mergers’, Economic Journal, 89, pp. 316–28.

    Article  Google Scholar 

  • Firth, M. (1980), ‘Takeovers, Shareholders Returns and the Theory of the Firm’, Quarterly Journal of Economics, 94: 235–60.

    Article  Google Scholar 

  • Franks, J.R. and Harris, R. (1989), ‘Shareholder Wealth Effects of Corporate Takeover: The UK Experience 1955–85’, Journal of Financial Economics, 23: 225–49.

    Article  Google Scholar 

  • Freeman, V. (1995) ‘Japan and Sweden Go Dutch’, Financial Times, 30 December.

    Google Scholar 

  • Gapper, J. and Athers, J. (1997) ‘Another Thundering Herd’, Financial Times, 6 February.

    Google Scholar 

  • Haldi, J. and Whitcomb, D. (1967) ‘Economies of Scale in Industrial Plants’, Journal of Political Economy, 75: 373–85.

    Article  Google Scholar 

  • Halpern, P. (1983) ‘Corporate Acquisitions: A Theory of Special Cases. A Review of Event Studies Applied to Acquisitions’, Journal of Finance, 38: 297–317.

    Article  Google Scholar 

  • Haugen, R.A. and Langetieg T.C. (1975) ‘An Empirical Test for Synergism in Merger’, Journal of Finance, 30: 1003–14,

    Article  Google Scholar 

  • Hill, C.W.L. and Hoskisson, R.E. (1987), ‘Strategy and Structure in the Multiproduct Firm’, Academy of Management Review, 12: 331–41.

    Google Scholar 

  • Hilker, J.R. (1978) ‘Long-run Profit Maximization: An Empirical Test’, Kyklos, 31: 475–90.

    Article  Google Scholar 

  • Hobday, M. (1992) ‘The European Electronics Industry’, in D. Dyker (ed.), The European Economy. Harlow: Longman.

    Google Scholar 

  • Jensen, M.C. (1986) ‘Agency Costs of Free Cash Flow, Corporate Finance and Takeovers’, American Economic Review, 76: 323–9.

    Google Scholar 

  • Kumar, M.S. (1985) ‘Growth, Acquisition Activities and Firm Size’, Journal of Industrial Economics, 34: 327–38.

    Article  Google Scholar 

  • Linneman, R. and Stanton, M.J. (1991) Making Niche Marketing Work. New York: McGraw-Hill.

    Google Scholar 

  • Livesey, F.(1995) A Textbook of Core Economics. Harlow: Longman.

    Google Scholar 

  • Mariotti, S. and Ricotta, E. (1987) ‘Diversification: The European versus the US Experience’, Multinational Business, 1: 23–32.

    Google Scholar 

  • Markides, C.C. (1990) Corporate Refocussing and Economic Performance, 1981–87. Unpublished Doctoral Dissertation, Harvard Business School, Boston.

    Google Scholar 

  • Markides, C.C. (1993) ‘Corporate Refocusing’, Business Strategy Review 4.1: 1–15.

    Article  Google Scholar 

  • Marris, R. (1966) The Economic Theory of Managerial Capitalism. London: Macmillan.

    Google Scholar 

  • Mason, R.H. and Goudzwaard, M.B. (1976) ‘Performance of Conglomerate Firms’, Journal of Finance, 31: 39–48.

    Google Scholar 

  • Martinson, J. (1996), ‘Scottish Power to Shed Half Southern Workforce’, Financial Times, 4 December.

    Google Scholar 

  • Meeks, G. (1977) Disappointing Marriage: A Study of the Gains from Merger. Cambridge University Press.

    Google Scholar 

  • Montgomery, C.A. and Wernerfelt, B. (1988) ‘Diversification, Ricardian Rents, and Tobin’s Q’, Rand Journal of Economics, 19: 623–32.

    Article  Google Scholar 

  • Mueller D.C. (1987) The Corporation: Growth, Diversification and Mergers. London: Harwood.

    Google Scholar 

  • Oram, R. and Cramb, G. (1997) ‘Unilever Seeks £6 Billion from Speciality Chemicals Sale’, Financial Times, 13 February.

    Google Scholar 

  • Parkinson, C. and Dobbins, R. (1993) ‘Returns to Shareholders in Successfully Defended Takeover Bids: UK Evidence 1975–1984’, Journal of Business Finance and Accounting, 20: 501–20.

    Article  Google Scholar 

  • Peel, M.J. (1995) ‘The Impact of Corporate Restructuring: Mergers, Divestments and MBO’s, Long Range Planning, 28: 92–101.

    Article  Google Scholar 

  • Penrose, E.T. (1959) The Theory of the Growth of the Firm. Oxford. Blackwell.

    Google Scholar 

  • Pratten, C.F. (1971) Economies of Scale in Manufacturing Industry. Cambridge University Press.

    Google Scholar 

  • Reguly, E. (1996) ‘Urge to Merge Displaces Age of High-cost Takeover Mania’, The Times, 8 March.

    Google Scholar 

  • Reguly, E. and Tierman, R. (1996) ‘Hollick Deal Heralds Era of New Media Conglomerates’, The Times, 9 February.

    Google Scholar 

  • Rumelt, R. (1974) ‘Strategy, Structure and Economic Performance’, unpublished MA thesis, Harvard Business School.

    Google Scholar 

  • Sadtler, D., Campbell, A. and Koch, R. (1997) Break Up, New York: Capstone

    Google Scholar 

  • Scherer, F.M., Beckenstein, A. Kaufer, E. and Murphy, R.D. (1975) The Economics of Multiplant Operations. Cambridge, Mass.: Harvard U.P.

    Google Scholar 

  • Seargeant G. (1997), ‘Take this Corporate Panacea, there are Plenty More if it Fails’, The Times, 27 February.

    Google Scholar 

  • Sharp, M. (1990) ‘The Single Market and European Policies for Advanced Technologies’, Discussion Paper 75, Science Policy Research Unit, University of Sussex.

    Google Scholar 

  • Silbertson, Z.A. (1972), ‘Economies of Scale in Theory and Practice’, Economic Journal, 82: 369–91.

    Article  Google Scholar 

  • Singh, A. (1971) Takeovers. Cambridge University Press.

    Google Scholar 

  • Singh, A. (1975) ‘Takeovers, Economic Natural Selection and the Theory of the Firm: Evidence from the Post-War UK Experience’, Economic Journal, 85: 497–515.

    Article  Google Scholar 

  • Skapinker, M. and Gray, B. (1996) ‘Cruising at Dizzy Heights’, Financial Times, 17 December.

    Google Scholar 

  • Sudarsanam, S. (1990) ‘Merger Gains to Bidders and Target Company Shareholders: An Empirical Test of Synergy in United Kingdom Mergers’, paper presented to Annual Conference of the European Accounting Association, Budapest.

    Google Scholar 

  • Taylor, B. and Herbert, P. (1987) International Strate-gies of Growing Companies. Henley: Henley Management College.

    Google Scholar 

  • The Economist, (1997a) ‘Cut and Paste’, The Economist, 1 February.

    Google Scholar 

  • The Economist, (1977b) ‘Why Too Many Mergers Miss the Mark’, The Economist, 4 January, pp 59–60.

    Google Scholar 

  • Tehan, P. (1995) ‘TSB says Yes to Lloyds After Five-Year Courtship’, The Times, 10 October.

    Google Scholar 

  • Thomson, R (1995a) ‘Big is Beautiful for Banks in America’s Merger Mania’, The Times, 28 July.

    Google Scholar 

  • Thomson, R. (1995b) ‘Chase and Chemical Bank on Big Deal with a Difference’, The Times, 29 August.

    Google Scholar 

  • Thomson, R. (1997) ‘Wall Street Banks to Merge’, The Times, 6 February.

    Google Scholar 

  • Todd, A. and Taylor, B. (1993) ‘The Baby Sharks: Strategies of Britiain’s Supergrowth Companies’, Long Range Planning, 26: 69–78.

    Article  Google Scholar 

  • Utton, M.A. (1974) ‘On Measuring the Effects of Industrial Mergers’, Scottish Journal of Political Economy, 21: 13–28.

    Article  Google Scholar 

  • Weston, S.F. and Mensinghka, S. K. (1971) ‘Tests of Efficiency Performance of Conglemerate Firms’, Journal of Finance, 26, 919–36.

    Article  Google Scholar 

Download references

Authors
  1. Frank Livesey
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. University of Central Lancashire, UK

    Brian Atkinson (formerly Senior Lecturer in Economics), Frank Livesey (formerly Professor of Economics) & Bob Milward (Senior Lecturer in Economics) (formerly Senior Lecturer in Economics),  (formerly Professor of Economics) &  (Senior Lecturer in Economics)

Copyright information

© 1998 Frank Livesey

About this chapter

Cite this chapter

Livesey, F. (1998). How Firms Grow. In: Atkinson, B., Livesey, F., Milward, B. (eds) Applied Economics. Palgrave, London. https://doi.org/10.1007/978-1-349-14250-7_3

Download citation

Publish with us

Policies and ethics

Search

Navigation