Spontaneous centralization of control in a network of company ownerships

TL;DR

This paper presents a model demonstrating how a network of company ownerships can spontaneously develop a centralized core through adaptive dynamics, without explicit strategic intent, reflecting real-world corporate control structures.

Contribution

It introduces a simple adaptive model explaining the emergence of centralized corporate control networks observed empirically.

Findings

A small core of large companies naturally forms through rich-get-richer dynamics.

Centralized control structures can emerge spontaneously without explicit strategic planning.

The model aligns with empirical observations of global corporate control networks.

Abstract

We introduce a model for the adaptive evolution of a network of company ownerships. In a recent work it has been shown that the empirical global network of corporate control is marked by a central, tightly connected "core" made of a small number of large companies which control a significant part of the global economy. Here we show how a simple, adaptive "rich get richer" dynamics can account for this characteristic, which incorporates the increased buying power of more influential companies, and in turn results in even higher control. We conclude that this kind of centralized structure can emerge without it being an explicit goal of these companies, or as a result of a well-organized strategy.