31 August 2009 • 7:00 am

Size Matters – But is Bigger Always Better?

Economist illustration by by Jon Berkerly

Economist illustration by by Jon Berkerly

The cover story in the U.S. edition of this week’s Economist proclaims that “Big is Back” – that the era in which large companies were on the defensive and the small company model was ascendant is coming to an end. And it is true that big companies have had their share of challenges over the past several years. The U.S. telephone monopoly AT&T was broken up in a court-ordered divestiture in the 1980s. Giants such as Enron, MCI, and Arthur Anderson fell prey to management misbehavior, and formerly powerful financial behemoths such as Merrill Lynch, Bear Stearns, Countrywide Home Finance, and Northern Rock were victims of the implosion of the past few years, and General Motors and Chrysler are meek shadows of their former selves. In an interesting and telling statistic, the Economist asserts that the share of GDP produced by big industrial companies fell from 36% in 1974 to 17% in 1998.