[jgmmo]

It's called Diseconomies of scale.

At some point, growing past a certain point causes decreasing returns to scale instead of increasing/constant returns to scale. Meaning over-scaling leads to a breakdown in efficiency.

Example using Walmart: Year by year it gets more efficient, and more efficient, and more productive, until one day the company starts becoming top heavy and full of red tape at which time it becomes less efficient from all the layers of administration, from burdensome policies and processes, [insert any factor here], etc. It has gone past it's 'profit maximizing size' and has gone too far.

It is not an argument against corporations, just an argument against "bigger is always better". There will always be companies.

[dfuhriman]

Right- and are we doing ourselves a diservice by having "Too Big to Fail"- and having companies grow past the optimal size? Once it is too large, each employed person's output is smaller than what it could be in a smaller company. Which is why a lot of people leave large companies to launch start-ups and why a lot of start-ups that are acquired fail when in a larger and bureaucratic system.