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Innovation is an important source of expansion and

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Innovation is an important source of expansion and productivity which can contribute toeconomic growth. However, it can also lead to unemployment in the short and medium-term. The determinants of the rate of innovation include the market structure in which thefirm finds itself, governmentpolicyand the size of the firm.(b)The second may be which a firm may achieve growth is by external expansion throughintegration or amalgamation which has been the main source of growth throughout the 20thcentury.DEFINITION: Integration refers to the joining together of two or more firms under onemanagement. This may take the form of a merger in which the firms may join together on moreor less equal basis. On the other hand, it may take the form of a take-over in which one firm canassume ownership andcontrolof another firm.Let us make a clear distinction between a merger and a take-over.DEFINITION: A merger occurs when two or more firms agree to join or form a new enterprise.This is usually done by making the shareholders of the two or new companies exchange theirshares for new ones in the new company. A well-known example is the formation of the Daimler-Chrysler in 1978 from Daimler Benz, a German automobile company and Chrysler and Americanautomobile companyAtake-overor acquisition on the other hand, occurs when one companybuysall, or at least 50%of the shares in the ownership of another company. In this case, the firm being acquired or takenover by another often loses completely its own identity and becomes part of the other company.ADJEI-BISA5
ECONOMICS-GROWTH OF FIRMS2013As an alternative to a take-over, an entirely company may be formed for the sole purpose ofbuying out shares in the ownership of a number of other companies. This is known as aholdingcompany.DEFINITION: A holding company is a company that has control over a number of othercompanies through the ownership of a sufficient proportion of their shares (i.e. 51 percent).By buying significant shares in other companies, the holding company is able to acquiresubsidiaries at a cost which is cheaper than would have been the case if it had bought theirphysical assets.

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Term
Spring
Professor
madam Barbara
Tags
Economics, Unemployment, The Wealth of Nations, Production and manufacturing

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