Definition
- Constraint on growth
- A constraint on growth is a limit on how large a firm can become, set by its market, its finance, its owners' aims or the law.
- Not to be confused with: Diseconomies of scale
- Diseconomies of scale are the rise in average cost that comes when a firm grows so large that it becomes hard to manage.
Test yourself
What is the difference between constraint on growth and diseconomies of scale?
A constraint stops a firm growing in the first place; diseconomies of scale are a cost the firm meets once it has grown.