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)