We now turn from the investment behaviour of the firm to the investment behaviour of monopoly houses in the large-scale manufacturing sector in the sixties. The manufacturing sector was dominated by a small number of monopoly houses, as we have seen in Chapter 2, and in these cases the investment decision is taken not at the level of the individual firm under its control but by the monopoly house for the group as a whole. The group, with its centralised family control, functions as a single coordinated organisation even though the corporate units under its control are separate legal entities.

This chapter starts with an explanation of why the monopoly house and not the individual firm is the unit of decision making in the corporate sector and looks at the way in which profits and the availability of cheap foreign exchange loans influenced investment decisions during the period of the sixties. A simple model of investment behaviour taking into account these factors is empirically tested for monopoly houses comprising firms which were quoted on the stock exchange and engaged predominantly in the manufacturing sector. The exercise was then enlarged to see to what extent the size of monopoly houses, with fixed assets taken as a measure of their economic power, influenced their growth and access to foreign exchange loans during this period.

Monopoly house as the decision-making unit

There are two main reasons why the monopoly house and not the individual firm is the unit for decision making in the corporate sector.