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The Business Bowtie

http://www.zawya.com/story.cfm/sidZAWYA20111030055925/147_most_powerful_companies

In lecture, we talked about the internet and how its organizational structure can be represented in the form of a theoretical “bowtie.” The left “bow” represents something less than a quarter of all webpages (or nodes). This part of the symbolic representation is made up of “origination” pages that allow web-users to arrive at the core. However, these pages themselves cannot be reached from the core. The “knot” of the bowtie (the center) contains more than one quarter of all webpages. These nodes are strongly connected and have a high degree of cross-linking among them. Since they are so highly linked, web-users can move easily from one page to another within the strongly connected core. Finally, the right “bow” also represents less than a quarter of all nodes according to lecture. These are noted as “termination” pages that can be linked from the core. However, they cannot link back to the core.

The article mentioned above uses the same theoretical “bowtie” and its associated implications to represent the influence of thousands upon thousands of transnational companies. The study analyzed 43,060 transnational companies spanning 191 countries that included 30 million “economic actors” (such as shareholders and subsidiaries). The authors point out that they “applied a recursive search which singles out, for the first time to our knowledge, the network of all the ownership pathways originating from and pointing to transnational companies.” In comparison to the internet bowtie structure, this bowtie has a strongly connected component core that is very small compared to other sections of the bowtie. The authors found that three fourths of ownership in firms in the core is in the core itself. Put simply, the core is a highly linked group of corporations that hold the majority share of each other. Three fourths of the core are financial intermediaries. Nearly four tenths of control over transnational companies around the globe is held by only 147 companies in the core.

What are the implications of these findings?

Most transnational companies in the core have “overlapping domains of activity.” Since they are connected by ownership, they could potentially form economic “blocs” and ultimately hinder market competition. This is especially bad for startup transnational companies who have no financial or economic influence to begin with. A very small fraction of companies is holding the majority of commerce, wealth, and thus power in the business realm. Without market competition, our capitalistic economic system is potentially in danger.

Reference Article:

http://newsbreaks.infotoday.com/nbreader.asp?ArticleID=17813

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