Network topology. (A) A bow-tie consists of in-section (IN), out-section (OUT),
strongly connected component or core (SCC), and tubes and tendrils (T&T). (B) Bow-tie structure of the largest connected component (LCC) and other connected components (OCC). Each section volume scales logarithmically with the share of its TNCs operating revenue. In parenthesis, percentage of operating revenue and number of TNCs, cfr. Table 1. (C) SCC layout of the SCC (1318 nodes and 12191 links). Node size scales logarithmically with operation revenue, node color with network control (from yellow to red). Link color scales with weight. (D) Zoom on some major TNCs in the financial sector. Some cycles are highlighted.
In 2007, a mere 147 companies controlled nearly 40 percent of the monetary value of all transnational corporations, researchers report in a paper published online July 28 at arXiv.org.
The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.
“This is empirical evidence of what’s been understood anecdotally for years,” says information theorist Brandy Aven of the Tepper School of Business at Carnegie Mellon in Pittsburgh.
While any man on the street may have predicted this outcome, the economic literature portrays markets as so dynamic that they lack hot spots of control, Glattfelder says.
And even though the status of many players in the analysis has changed drastically since 2007 (now-defunct Lehman Brothers is a key element of the core), the analysis shows that ownership is becoming increasingly concentrated and increasingly transnational, says Gerald Davis of the University of Michigan in Ann Arbor.