The Network of Global Corporate Control
Stefania Vitali, James B. Glattfelder and Stefano Battiston
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  is needed in order to uncover the structure of control and its implications. Recently, economic networks have attracted growing attention , e.g., networks of trade , products , credit , , stock prices  and boards of directors , . This literature has also analyzed ownership networks , , but has neglected the structure of control at a global level. Even the corporate governance literature has only studied small national business groups . 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 , . Moreover, linkages among financial institutions have been recognized to have ambiguous effects on their financial fragility , . Verifying to what extent these implications hold true in the global economy is per se an unexplored field of research and is beyond the scope of this article. However, a necessary precondition to such investigations is to uncover the worldwide structure of corporate control. This was never performed before and it is the aim of the present work.