In this essay we will discuss about:-

1. Introduction to Industrial Combinations

1. Introduction to Industrial Combinations and Its Causes: Industrial combinations or mergers are
gaining ground these days. In fact these are outstanding feature of modern industrialization. Behind
each formation of industrial combination there are certain motivating forces and factors

There are certain causes responsible for the growth of combinations. Industrial combinations have both
advantages as well as disadvantages. Not only this, but industrial combinations are of different types
and there are different forms of industrial combinations.

Causes of Industrial Combinations:

i. Organisational Ability:

Many combinations are formed because of the ambition of the industrialists. They are encouraged by
favourable tariff policy and capital market etc.

ii. Trade Cycles:

Combinations are encouraged when in the country there are too many economic fluctuations and
business cycles. During depressions many smaller as well as inefficient industrial units go out of market.
These are then absorbed by the

Therefore, there is desire on the part of smaller units to combine with bigger units. Economic
fluctuations can also result in boom in the industry. It is at this stage that every industrialist will try to
take maximum risk, so that it can earn. During boom period there is also desire for combination so that
element of risk is reduced to the minimum. Since industrial cycles are inevitable, therefore, desire to
have combination is bound to be there and that cannot be wiped out.

iii. Rationalisation:

Rationalisation can be effectively introduced when there is some sort of collective action. It demands
that efficient and inefficient units must work and combine together. Similarly it is provided that big and
small units must alsocombine with each other. It is with the help of combinations that stabilisation in
industry becomes possible.

iv. Technological Advancements:

Modern technology has resulted in setting up of large size industries and specialisation. It has also
resulted in the concentration of economic power in the hands of very few persons. All this has
encouraged and is bound to encourage combination, because it is quite clear that advantages of modern
technology cannot be fully derived unless, there are industrial combinations. No small industrial unit can
possibly face national or international competition.
v. Governmental Policies:

Combination is also encouraged by the policies which the government follows. If governmental taxation
policies are such which encourage combinations, obviously the industries will try to combine. Similarly, if
these policies discourage big industries, obviously the industrialists will try to remain separate, rather
than coming closer and nearer to each other. Thus governmental policies go a long way in encouraging
or discouraging combinations