In a recent paper in this JOURNAL, Richard Tilly investigated mergers among leading German industrial firms during the 1880-1913 period.' He was concerned with two issues in his paper. One was the timing of merger activity, in particular its relation to stock price fluctuations; the second was the contribution of mergers to the of the enterprises in his sample. I wish to comment on Tilly's treatment of the latter. The measurement of the contribution of mergers to firm is not a simple matter. Tilly proceeded as follows. He first calculated the total in assets of his sample firms over the period; then he calculated the total assets of firms acquired during the period. The ratio of assets acquired to total asset was .17; Tilly proposes that this ratio is a measure of the contribution of mergers (external growth) to total enterprise growth. The low value of the ratio of acquired to total assets suggests that the emphasis in the literature on external has been exaggerated and that there were more important avenues of open: external was only a sixth of total growth (Tilly, p. 635). He also draws implications from his evidence for diversificationIf diversification was as important for success as many authors say, then according to the evidence here, it must have depended largely on redirection of internal growth (Tilly, p. 639). Tilly's procedure is one answer to a difficult question: to what extent is the later of an amalgamated company due to the acquired firm, the acquiring firm, or a combination of the two?2 In fact, it is an extreme answer, and his conclusions are in part dependent upon it. Merger contributes to the of the acquiring firm not only through the aquired firm's size at the time of the merger, which Tilly accounts for, but also through the subsequent of the acquired firm. In Tilly's procedure, all that is due to the subsequent of the acquired firm is designated internal, rather than external, and is assigned to the acquiring firm. Let me illustrate the problem with a hypothetical example. Firm A has assets of $1 million in 1880, while Firm B has assets of $500,000. Firm A acquires Firm B in that year, and makes no other acquisitions. By 1890, Firm A's asset size is $2 million. Under the Tilly procedure, total asset of Firm A is $1 million in the ten-year interval; one-half of that is external through the acquisition of Firm B, while one-half is defined to be internal growth. Yet it is quite likely that, had it not been acquired, Firm B would have grown internally in subsequent years; that is, its assets would have generated quasirents sufficient to finance further enterprise growth, and the of its markets would have provided the incentive to expand. If this is true, then Firm B's assets, after being acquired by Firm A, should also have generated quasirents sufficient to finance some further of Firm A. Let us call this later in Firm A, that is due to the acquired assets of Firm B, indirect by merger.