The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Alan Hughes
Reference work entry


The overall output of a firm may be composed of activity in more than one product market. The growth of individual firms will be composed of changes in the scale of their activities in each of the markets in which they operate and in the numbers of those markets. In any period these changes will consist of horizontal expansion in the market(s) in which they operated at the beginning of the period and entry into new markets; where there is a supplier or buyer relationship with the original market then this expansion will be vertical integration. Expansion which fits neither of these categories is termed diversifying or conglomerate expansion. Growth in any of these directions may be by the purchase of new assets (internal growth), or by the purchase of existing assets through takeover or merger (external growth). Although it is common to refer to non-horizontal and non-vertical expansion as diversified, or conglomerate, the latter term also has a more specific connotation emphasizing particularly diverse external expansion. It has in particular been used to mean a company which has by a deliberate strategy of external growth, often away from declining sectors, developed a highly diversified product range which cannot easily be characterized in terms of a single, or well defined, group of production technologies, a single set of major competitors, or a stable place in a well defined industry group (Steiner 1975; Weston 1980). (And in the US context to have financed that expansion with issues of paper rather than cash, accompanied by accounting techniques for consolidating acquired companies designed to boost earnings per share and make future paper issues even more profitable (Blair 1972; Steiner 1975).)

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Authors and Affiliations

  • Alan Hughes
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