Final answer:
Large firms often face the problem of increased bureaucratic controls, which can lead to inefficiencies, and the risk of becoming attractive takeover targets. Advancements in information and communications technology have sparked a debate over their influence on firm size, leading to discussions on the balance between large-scale benefits and competition.
Step-by-step explanation:
The question involves the difficulties faced by large firms. One significant problem associated with becoming too large is that firms typically increase bureaucratic controls.
As companies expand, the complexity of managing various operations and multiple locations often necessitates a more elaborate bureaucratic structure to maintain oversight and control. This increase in bureaucracy can lead to inefficiencies and slow decision-making processes. Furthermore, large scale can also make firms attractive takeover targets for competitors or investors looking to capitalize on their market share, resources, or established infrastructure.
Historical evidence and economic theory reveal that while competition encourages innovation and lower prices, large-scale production can reduce average costs. However, information and communications technology advancements have sparked controversy over their impact on firm size. These technologies could promote small firm competitiveness or lead to winner-take-all markets dominated by large companies. Policymakers must balance the benefits of large-scale operations against the potential decrease in competition, especially when considering interventions in the market or regulatory decisions.