Change in the market share of US banks over time, measured by growth in fractional balance sheet size. The banks are ranked into percentiles by proportion of total balance sheet size. The rightmost, thick black line is the top 1%.

Business mergers and acquisitions bring about significant imbalances in the functioning of economic systems, and the threat of monopoly looms large, according to a new analysis of economic data published in Proceedings of the Royal Society A.

Drawing approaches from complexity and evolutionary biology -- and analyzing historical business data from a variety of industries and geographies and from the 1830s to the present -- SFI Distinguished Professor Geoffrey West and colleagues from Imperial College London and PricewaterhouseCoopers show that the cumulative history of mergers and acquisitions of companies (i.e. ancestry) is a key characteristic underpinning the dynamics of business ecosystems. 

They conclude that a universal mechanism leads to imbalanced business ecosystems in which a few very large but sluggish “too big to fail” entities, and very small niche entities prevail.

Read the paper in Proceedings of the Royal Society A (September 10, 2014)