holders and sufficient to remain competitive.
The historical growth of large firms is striking and attests to various forms of market power and government support that have little to do with organizational efficiency (Perrow, 1986; Williamson 1975). The major industries of the United States - oil and chemicals, iron and steel, automobiles, food processing, electronics and television, and now computers - are as concentrated as they are because the leading firms could control the market, labor, and government and were backed by powerful financial interests. The reasons for big firms are diverse; one reason is the ability to generate economies of scale. Since a firm requires various factors of production, such as land, labor, capital, supplies, technologies, and outlets, advantages in any of these areas by one firm will lead to the firm's growth compared to its competitors. Growth also requires at least tolerance on the part of the government, though state enabling factors and state resources will be beneficial to growth as well. Many of these government policies and resources will favor a whole industry, allowing it to prosper and grow, thus providing an incentive for some industry firms to take over other ones (Perrow, 1986, p. 248).
Next, the firm's growth requires market growth, through the discovery or creation of new markets or the expansion of existing ones. Since a firm's growth will be challenged by the growth of other firms and since the market is not infinite, the firm must keep competitors out entirely or, failing that, limit or reduce the number of competitors. One major way to achieve this is to acquire a competitor. Until recently, when financial considerations prompted the growth of conglomerates - firms that bring together unrelated businesses, such as Philip Morris (tobacco and food products) - most profit seeking acquisitions were in closely related fields, such as suppliers, competitors or distributors. The...