We usually consider that when a company is making a decision about whether it should expand or not, the company faces a constraint to limit its expansion action, then the company faces a similar issue as the production problem that it maximizes its preference (a combination of expected returns and risk), given its constraint. We usually believe that the company faces such constraints, time constraint, finance constraint, labour constraint and information constraint.
However, to many companies, if they can represent a credible plan of expansion, they are very likely to receive funding from their investors, which means when the companies are making necessary or profitable expansion, it does not face finance constraint, as it can seek external help. In addition, when a company is large enough, it also can find some people in the company to handle some urgent events. Moreover, time constraint and labour constraint in many cases are the same constraint, when a company has more labours, it can spend less time on one project when it has fewer labours. Therefore, the only constraint for a company to expand is the information constraint. The limitation of information does not only affect the risk, but also affects the overall judgement. If there is a very serious asymmetry of information, the company will ignore the opportunity of expansion, even this opportunity will deliver a great return.
Overall, the only limitation for a large company to expand is the information constraint, when the companies improve their data and information collection, their expansions will take place more smoothly without much limitation.
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