Earth Incorporated: Centralization and Variegation in the Global Company Network

abstract

Over the past twenty years, a widening gulf has appeared between the increasingly internationalized financing arrangements of the world’s leading corporations and the persistence of nationally compartmentalized approaches to the study of corporate control. In lieu of direct empirical evidence on corporate control at the global level, the most widespread assumption is that the globalization of ownership has taken the form of an expansion of arm’s-length, market-based arrangements traditionally prevailing in the Anglo-American economies. Here, however, we challenge this assumption, both empirically and conceptually. Empirically, we show that three-quarters of the world’s 205 largest firms by sales are linked to a single global company network of concentrated (5 percent) ownership ties. This network has a hierarchically centralized organization, with a dominant global network core of US fund managers ringed by a more geographically diverse state capitalist periphery. Conceptually, we argue that the this architecture can be broadly explained through a Polanyian variegated capitalist model of contradictory market institutionalization, with the formation of the global company network actually a counterintuitive product of global financial marketization. In order to understand this process of network formation, however, it is necessary to extend Polanyi’s model of a double movement, mediated through political interventions in the market, to incorporate Veblenian processes of evolutionary institutional change, mediated through the market.

Key words:

• global company network
• corporate ownership internationalization
• asset management concentration
• sovereign wealth funds
• state capitalism
• financialization
• variegated capitalism
• evolutionary economic geography

JEL codes:

• F65
• G23
• G32
• G34
• G38
• P16

Acknowledgments

Earlier versions of this article were presented by Daniel Haberly under the same title for the Human Geography Speaker series in the Department of Geographical Sciences at the University of Bristol, on October 20, 2015, the RGS-IBG Annual International Conference in London, on September 1, 2016, and the Centre for Urban and Regional Development Studies External Seminar Series at Newcastle University, on October 6, 2016. We would like to thank Adam Dixon, Jane Pollard, Ben Fine, and three anonymous reviewers for their helpful comments. Any errors or omissions are solely the responsibility of the authors. This work was supported by the Leverhulme Trust; [RGS-359]; Hong Kong Research Grants Council; [T31-717/12/R].

Notes

¹ Specifically the decay and reformation of patient capital sheltering German firms and workers from market shocks and investor demands.

² For example, ever-increasing securities trading volume, frequency, and complexity, ever more impatient investor demands for corporate share price and cash remittance maximization, etc.

³ See Clark and Wójcik (2007) for a discussion of this heterogeneity.

⁴ The all else being equal is crucial here, implying a potential willingness to sacrifice liquidity to increase returns.

⁵ In this respect we are referring to a long-term preference for liquid assets, in contrast to the cyclical flight into cash described by Keynesian theory.

⁶ A more modest restatement of the efficient market hypothesis, which sidesteps this debate, is the idea that any successful stock-picking strategy will–to the extent that it becomes popular–cease to be successful. Individual attempts to beat the market will thus tend to escalate, collectively, into costly and self-defeating informational arms-races.

⁷ Defined as both sample firms, and their ultimate 5 percent block holders.

⁸ This underscores the key role of the New York capital market specifically in global company network formation. A comprehensive city-level analysis of this network is a clear direction for research extension.