Holding companies: size-related cost economies

Ernst Berndt and Alvin Silk

Alvin Silk, Lincoln Filene Professor Emeritus at Harvard Business School, and Ernst Berndt, Louis B Seley Professor of applied economics at MIT Sloan School of Management, discuss an econometric study to investigate the economies of scale of the eight largest advertising holding companies in the world.

Holding Companies: Size-Related Cost Economies

Alvin SilkHarvard Business School and Ernst BerndtMIT Sloan School of Management

How big is big enough for a holding company? The advertising and marketing services business is not of one mind on this issue, as can be seen from the ongoing debate about the relative merits of holding companies and traditional full-service agencies with respect to performing the fundamental functions of delivering creative and integrated communications efficiently in an era of globalisation while satisfying client requirements concerning serving competing accounts (1).

Holding companies achieved double. digit growth rates during the 1990s...

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