— Overview
A firm can grow its capital from inside, by turning a profit into more capital — accumulation, or inward growth, which raises the total capital of a market and has a clear limit. Or it can grow from outside, by combining with another firm through acquisition or merger — concentration, or outward growth, which need not raise the social total of wealth, only change how it is divided, and can enlarge a single capital on a much larger scale.
Business concentration, on this page, is an effort to restrict competition by concentrating capital, to strengthen a hold on a market and to push profit as far as it will go, sometimes to a position close to monopoly. It first appeared, the essay says, in the economic panics of the late nineteenth century, grew during the First World War as banks and industry joined into finance capital, and after the world depression of 1929 was joined to state power, as the United States and other countries took up a modified capitalism with more public intervention, in what the page calls state-monopoly capitalism.
Combination among firms in the same or a similar line is called horizontal; combination along a production chain — a smartphone maker with a firm that makes the small chips inside the phone is the example — is vertical, for a cheaper, more rational process. A capital combination is one made by taking shares or making a long loan, in order to control another firm, a method the page ties to Korean chaebol and to finance houses.
The three forms, ranked by how much independence the firms keep and how tightly they are bound, are the cartel, the concern, and the trust. A cartel is banned in Korea, the essay says, because price and output agreements harm fair trade, the freedom of a market, and the rights of consumers. The sources named are Park Jin-geun’s Dictionary of Economics (Nurimedia, May 2002) and Yu Pil-hwa, Hwang Gyu-dae and three others, Management in the Global Era, 3rd edition (Orae, January 2014).
— Contents and key concepts
Inward growth, and a combination that need not add to the total
A firm usually competes with many others to raise a profit. If the competitors were not there, the profit would be easier. Capital can be enlarged in two ways. Accumulation is the firm’s own strength: profit is gradually turned into capital. The essay also calls it inward growth. Because it depends on the firm’s own capacity to accumulate, it has a clear limit. Concentration is a combination with another firm, in one of several forms, and can enlarge a capital on a much larger scale. The essay also calls it outward growth. The total capital of a market need not rise; what changes is how capital is divided, and the number of separate capitals falls. Social wealth is not, in that sense, increased, though production can jump.
Business concentration, on this page, is an effort to restrict competition by concentrating capital, to strengthen a hold on a market and to push profit as far as it will go. A firm that has obtained a great capital can shut others out, or limit their strength, and can come close to a monopoly. The phenomenon first appeared, the writer says, in the economic panics of the late nineteenth century, and grew during the First World War, mainly as a joining of banks and industry into finance capital. After the world depression of 1929, as the United States and other countries took up a modified capitalism with more public intervention, that finance capital was joined to state power, and what the page calls state-monopoly capitalism began.
Horizontal, vertical, and a loan that buys control
When the aim is to shut out or to hold down a competitor, combination is usually among firms in the same or a similar line. The essay also calls that a horizontal combination. Concentration is not only for that purpose. A firm may also combine with another that handles a different stage of the same product, in order to cut the cost or the time of production and to rationalise the process. That is a vertical combination: securing raw material, lowering the cost of production and distribution, sharing a technique. The example on the page is a smartphone maker combining with a firm that makes the small chips inside the phone.
There is also a capital combination, made by taking a holding, in order to control another firm. A large chaebol firm or a finance house, the writer says, buys another company’s shares, or makes a long loan, and so takes control. A chaebol may choose the method to lower the cost of control; a finance house, to raise a return on an investment.
A gentlemen’s agreement, a parent company, and a firm that disappears
The three forms are ranked by how much independence the firms keep and how tightly they are bound. A cartel keeps the highest independence and the loosest combination. Firms in the same or a similar line remain legally and economically unsubordinated, and restrict overheating competition by a gentlemen’s agreement on price, sales volume, output, technology, terms of sale, or territory. They obtain a more stable price and a hold on the market. The essay also calls a cartel collusion, or a union of firms, and treats it as a relatively passive, horizontal form. Such agreements, the writer says, can harm a fair order of trade, the freedom of a market, and the rights of consumers, and so are at present prohibited in Korea. That “present” is left with the essay. Worldwide, the page adds, examples can still be found among firms or among countries.
A concern sits in the middle. The firms stay legally independent, but one becomes economically dependent on another. The usual method is for one firm to hold the shares of the others, or to make a long loan, and so take the management. It is a vertical combination, along a related stage of production or distribution, for a more rational running of the business. The essay also calls it a league of firms. In Korea, the writer says, it often looks like a chaebol that keeps many subsidiaries in an octopus-like spread of management; the leading firm is a holding or parent company, the others are subsidiaries.
A trust has the lowest independence and the tightest combination. Firms give up legal and economic independence altogether and are bound into another firm, usually in the same or a similar line, as a horizontal combination, in order to shut out free competition, to hold a monopoly, and to rationalise management. The essay also calls it a merger. It began, the page says, in the United States, and is the form in which a firm can hold the strongest market power and the strongest monopoly over a great capital. Two shapes are named. In a new-company merger, the participating firms dissolve and put all their capital into a company created for the purpose. In a merger or acquisition, a large firm with a great capital absorbs the others. The same Korean report, at fuller length, is on CampusDown.
Sources
- Korean essay on the motives and forms of business concentration: accumulation and concentration of capital; horizontal, vertical, and capital combination; the cartel, the concern, and the trust.
- Park Jin-geun, Dictionary of Economics, Nurimedia, May 2002.
- Yu Pil-hwa, Hwang Gyu-dae and three others, Management in the Global Era, 3rd edition, Orae, January 2014.
- Late-nineteenth-century panics, finance capital in the First World War, and the joining to state power after 1929, as the essay recounts that history.
- The Korean prohibition of cartel agreements, as the page states it.
Last updated: 14 November 2026
Frequently asked questions
What is the difference, on this page, between the accumulation and the concentration of capital?
Accumulation is inward growth: a firm turns the profit of trade into more of its own capital, and the total capital of the market rises. It has a clear limit, because it depends on the firm’s own capacity to accumulate. Concentration is outward growth: a firm combines its capital with another’s, by acquisition or merger. The social total of wealth need not rise; what changes is how capital is divided, and the number of separate capitals falls. A single capital can then grow on a much larger scale. Business concentration is the name the essay gives to the several forms of that outward enlargement.
How do a cartel, a concern, and a trust differ?
They are ranked by independence and by tightness of combination. A cartel keeps the highest independence and the loosest combination: firms in the same or a similar line remain legally and economically unsubordinated, and restrict overheating competition by a gentlemen’s agreement on price, sales, output, technology, terms, or territory. The essay also calls it collusion, or a union of firms. It is a horizontal, relatively passive form. A concern sits in the middle: the firms stay legally independent, but one becomes economically dependent on another, usually by a holding of shares or a long loan, along a production or distribution chain — a vertical combination. In Korea, the writer says, this often looks like a chaebol with many subsidiaries; the leading firm is a holding or parent company, the others subsidiaries. A trust has the lowest independence and the tightest combination: firms give up legal and economic independence altogether, usually in the same line, and the essay also calls it a merger. It began, the page says, in the United States. Two shapes are named: a new-company merger, in which the firms dissolve and put their capital into a new company, and a merger or acquisition, in which a large firm absorbs the others.
Why does the essay say a cartel is banned in Korea?
Agreements of that kind, on price, output, and the rest, can harm a fair order of trade, the freedom of a market, and the rights of consumers, and so, the writer says, they are at present prohibited in Korea. That “present” is left with the essay. The same page still treats the cartel as the loosest of the three forms, and notes that, worldwide, examples can be found among firms or among countries, without naming a list.
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