> one could posit that a reason that large monolithic businesses exist (with centralized control etc) is because at scale you can get efficiency (to a limit i suppose)
Exactly--to a limit. But if you look at how large corporations work, it is at least highly plausible that they are over the limit--i.e., that they are larger, in some cases much larger, than the optimal size of a firm in their particular line of business.
The reason such large corporations can survive while being well over the optimal size of a firm in their line of business is government regulation. Government regulations favor larger businesses because the larger the business, the easier it is to absorb the costs of regulatory compliance. (And also the easier it is to buy regulations that favor your company.)
> with many small sized business interacting i wonder how it could keep efficiency with so many interacting parts
A free market does this naturally via the price mechanism. You can still have economies of scale, and in a free market we would expect most businesses to be at or near the optimal size of firm for their line of business.
Large corporations have coordination problems too--that's a key reason why there are limits to economies of scale. At some point the coordination problems outweigh any efficiencies from scale and the business gets less efficient overall if it continues to get larger.
Exactly--to a limit. But if you look at how large corporations work, it is at least highly plausible that they are over the limit--i.e., that they are larger, in some cases much larger, than the optimal size of a firm in their particular line of business.
The reason such large corporations can survive while being well over the optimal size of a firm in their line of business is government regulation. Government regulations favor larger businesses because the larger the business, the easier it is to absorb the costs of regulatory compliance. (And also the easier it is to buy regulations that favor your company.)
> with many small sized business interacting i wonder how it could keep efficiency with so many interacting parts
A free market does this naturally via the price mechanism. You can still have economies of scale, and in a free market we would expect most businesses to be at or near the optimal size of firm for their line of business.
Large corporations have coordination problems too--that's a key reason why there are limits to economies of scale. At some point the coordination problems outweigh any efficiencies from scale and the business gets less efficient overall if it continues to get larger.