The network of global corporate control


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.
A common intuition among scholars and in the media sees the global economy as being dominated by a handful of powerful transnational corporations (TNCs). However, this has not been
confirmed or rejected with explicit numbers. A quantitative investigation is not a trivial task
because firms may exert control over other firms via a web of direct and indirect ownership relations which extends over many countries. Therefore, a complex network analysis [1] is needed in
order to uncover the structure of control and its implications. Recently, economic networks have
attracted growing attention [2], e.g., networks of trade [3], products [4], credit [5, 6], stock prices
[7] and boards of directors [8, 9]. This literature has also analyzed ownership networks [10, 11],
but has neglected the structure of control at a global level. Even the corporate governance literature has only studied small national business groups [12]. Certainly, it is intuitive that every large
corporation has a pyramid of subsidiaries below and a number of shareholders above. However,
economic theory does not offer models that predict how TNCs globally connect to each other.
Three alternative hypotheses can be formulated. TNCs may remain isolated, cluster in separated
coalitions, or form a giant connected component, possibly with a core-periphery structure. So
far, this issue has remained unaddressed, notwithstanding its important implications for policy
making. Indeed, mutual ownership relations among firms within the same sector can, in some
cases, jeopardize market competition [13, 14]