In Scale and Scope, Chandler refines and broadens this analytical apparatus. To bring "the modem industrial enterprise into being," a "three-pronged investment in manufacturing, marketing, and management" proved essential, to "consolidate production facilities into plants of optimal size, establish the necessary marketing networks, and recruit the managerial organization." Without it,' 'economies of scale and scope in production" would have been unattainable, but with it "cost per unit dropped more quickly as the volume of materials being processed increased," and "economies of joint production or distribution" of more than one single product in one market area were realized. Chandler extends his analysis in another, more significant way. The "competitive managerial capitalism" of the United States is compared with "cooperative managerial capitalism" in Germany and "personal capitalism" in Great Britain. The case studies are the 200 largest industrial firms in the three nations from 1880 to the 1940s. For these 600 firms, data on assets and product lines are presented in a 101-page appendix that places all students of economic and business history deeply in Chandler's debt.
The rise of the large corporation and the displacement of price-competitive markets by the constrained rivalry of oligopolists is not exactly virgin territory. Economists and historians have explored it, and alternative hypotheses readily come to mind. One is that new technologies and markets open a door of opportunity, and profit-seekers use every means at their disposal to be first through and slam it closed against all followers. Powers inherent in the capitalist accumulation process thus shape the conditions within which technologies and markets are exploited. The implication is that while creation of efficiency-maximizing institutions helps to capture what Chandler calls "first-mover advantages," so do predatory actions, coercion, pools and cartels, financial power plays, monopsonistic controls over the work force, and other means both economic and noneconomic--a pointless distinction in such matters, as Thorstein Veblen demonstrated in The Theory of Business Enterprise (1904). Several of the new firms would be expected to embody cost-minimizing techniques and technological dynamism, but others would reach and maintain bigness through strategies that failed to improve efficiency and in some cases impaired it.
Firm size and efficiency
The history of big business not only gives rise to different explanatory theories; it has also yielded empirical evidence on the relationship between firm size and productive efficiency. Economists refer to "minimum efficient scale" (MES) as the smallest-size plant or firm at which average costs are minimized: it is attained through economies