How Firms Grow

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.