Full text: Small and Big Business

A second reason why the biggest concerns may have lower profit 
rate is that they may be less efficient and, especially, less 
innovative than others for reasons of internal organisation. 
They tend to be overconfident as a result of a successful past, 
and to become rigid due to traditions and routine which again 
is^fostered by a history of success. 
I think this factor is more important than other more con 
ventional diseconomies. In this book I played down dis 
economies too much, and this was an error. In principle it 
must be recognized that the growth of the firm leads to serious 
inconvenience. The mere geographical size of the market increases, 
and with it cost of transport to the easterner. The plant itself 
covers more space, therefore there is more internal transport. 
Much more important, with the increase in the nuraber of people 
cooperating the difficulties of communication between them 
increase disproportionately.This leads to increasingly 
diversified hierarchical structures designed to save communication 
lines and to loss in efficiency. 
The computer is a grafct help in improving communication, and 
therefore it is a boon to the very big firms. 
10) H.A. Simon, Decision Making and Operational Design. 
J.Ü. March and H.A. Simon, The Dysfunction of Bureaucracy. 
ins Organisation Theory. Ed. Pugh, Penguin Books 1971.

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