Research Ideas from Class: Agglomeration in Nonprofits, 1

Internal Economies

When a firm expands to cover multiple activities, it reduces cost by internal agglomeration. “The spreading of fixed costs over a larger output, greater division of labor, the potential for using alternative technologies, and saving through bulk purchases are sources of internal agglomeration.” (72) Economies of scales, which is efficiency by size, can also be internal agglomeration by being concentrated in one place.

Internal economies are helpful at spreading fixed costs over larger outputs. Examples are

• Sharing buildings: multi-use, time sharing. Catholic churches have shared their large buildings with other congregations to cut down on paying the costs.
• Sharing equipment: communal resources, labs.
• Sharing infrastructure: roads, connections. Which comes naturally with being in the same location.
• Savings through bulk purchases
• Greater division of labor