Page 17 - Lunacy and the Age of Deception

The Network of Global Corporate Control
Stefania Vitali, James B. Glattfelder, Stefano Battiston
Published: October 26, 2011

Introduction
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...

Network Topology
In terms of connectivity, the network consists of many small connected components, but the largest
one (3/4 of all nodes) contains all the top TNCs by economic value, accounting for 94.2% of the total
TNC operating revenue...

A generalization is a strongly connected component (SCC), i.e., a set of firms in which every member
owns directly and/or indirectly shares in every other member... The second characteristics (sic) is
that the largest connect component contains only one dominant strongly connected component (1347
nodes). Thus, similar to the WWW (World Wide Web), the TNC network has a bow-tie structure. Its
peculiarity is that the strongly connected component, or core, is very small compared to the other
sections of the bow-tie... The core is also very densely connected, with members having, on average,
ties to 20 other members. As a result, about 3/4 of the ownership of firms in the core remains in the
hands of firms of the core itself. In other words, this is a tightly-knit group of corporations that
cumulatively hold the majority share of each other.

Discussion
In detail, nearly 4/10 of the control over the economic value of TNCs in the world is held, via a
complicated web of ownership relations, by a group of 147 TNCs in the core, which has almost full
control over itself. The top holders within the core can thus be thought of as an economic
“super-entity” in the global network of corporations. A relevant additional fact at this point is that
3/4 of the core are financial intermediaries. Figure 2 D shows a small subset of well-known
financial players and their links, providing an idea of the level of entanglement of the entire core.