16
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.
f
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.