From 1895-1905, the United States industry underwent major reorganization that had long term impacts on the structure of businesses. Small firms consolidated into giants with a large market share. These mergers involved mass producers of homogeneous goods that exploited efficiencies of volume production. They were generally capital-intensive with high fixed costs; when demand fell, output would remain steady and prices would fall instead. In theory, these mergers were economically viable in the long run because the largest firm would take the supply decisions of independents as given and set the monopoly price above the competitive price. In practice, companies faced the challenge of deterring new entrants that would threaten the market share of the dominant firm. One solution to the problem of new entrants to the market was setting a “limit price” at which the dominant firm would make a profit, and the small independent firms would break even. The problem with this however was that the dominant firms would face higher costs than competitors. Other solutions to the new entrant problem included short-term price wars and the creation of entry barriers. Moreover, some companies chose to differentiate their products in order to reduce the price elasticity of demand. This movement and consolidation formed the foundation for what was later coined as "big business."

Long-run factors which led to the rise of big business include technological change, which increased the efficient size of plants from non-mechanized factories with very few workers to large, modern industries, and reductions in transportation costs, which made it easier to produce goods in one location and ship to markets around the country.

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