A recent report by the Information Technology and Innovation Foundation (ITIF) suggests that several industries in the United States could potentially benefit from increased consolidation and economies of scale. The sectors that stand to gain include banking, construction, and telecommunications.
According to an ITIF press release, the think tank's report examined 12 industries across five sectors—banking, construction, farming, physician’s offices, and telecommunications. The study revealed that companies employing 500 or more individuals demonstrate higher productivity than those with fewer than 500 employees. The ITIF highlighted that small businesses constitute the majority of companies in all five sectors under consideration, indicating potential opportunities for further consolidation to achieve enhanced economies of scale.
"The prevailing view among pundits and policymakers in Washington is that the U.S. economy is too concentrated, so we need aggressive antitrust enforcement to break up large firms. But the data suggests it’s really the other way around: Many U.S. industries would benefit from more consolidation, not less," said Robert D. Atkinson, President of ITIF. "With greater scale, firms become more productive. That’s critical because boosting productivity is the only way to raise wages, spur innovation, and grow the economy."
The press release also disclosed some specific findings of the report. For instance, large commercial banks were found to be 2.6% more productive than the average within their sector. In contrast, small banks—which constitute 95% of commercial banks—are 10.6% less productive than average. Similarly, large doctor’s offices outperform their sector's average by 4.6%, while small doctor’s offices—making up over 99% of all such establishments—are 3% less productive than average. Comparable trends were observed in both construction and telecom industries.
"The data illustrates how scale begets productivity," stated Trelysa Long, an ITIF Analyst and author of the report. "This analysis focuses on just 12 industries in 5 sectors, and it shows very clearly that large firms are more productive, yet also far outnumbered by small firms. So, there is a huge opportunity to boost productivity through consolidation in those industries."
