ABSTRACT
The chapter enables the discussion to be integrated by exhibiting diversification, merger and innovation as different aspects of a single competitive process. It discusses the firm, the industry or the economy as a whole depending on the level. Diversification is recognised as a phenomenon of great importance in the contemporary capitalist economy. At the theoretical level the traditional theory's preoccupation with the single product firm has to a considerable extent been counterbalanced by the emphasis placed on diversification in the new theories of the growth of the firm. Merger activity has been measured in several ways: by the number of mergers occurring per year; by the number weighted by some index of the scale of the individual mergers – usually the (stock market) value of the combined concern or the price paid by the acquiring firm.
