Stefania Vitali

The Network of Global Corporate Control

The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.

The Community Structure of the Global Corporate Network

We investigate the community structure of the global ownership network of transnational corporations. We find a pronounced organization in communities that cannot be explained by randomness. Despite the global character of this network, communities reflect first of all the geographical location of firms, while the industrial sector plays only a marginal role. We also analyze the meta-network in which the nodes are the communities and the links are obtained by aggregating the links among firms belonging to pairs of communities. We analyze the network centrality of the top 50 communities and we provide a quantitative assessment of the financial sector role in connecting the global economy.

Geography versus topology in the European Ownership Network

In this paper, we investigate the network of ownership relationships among European firms and its embedding in the geographical space. We carry out a detailed analysis of geographical distances between pairs of nodes, connected by edges or by shortest paths of varying length. In particular, we study the relation between geographical distance and network distance in comparison with a random spatial network model. While the distribution of geographical distance can be fairly well reproduced, important deviations appear in the network distance and in the size of the largest strongly connected component. Our results show that geographical factors allow us to capture several features of the network, while the deviations quantify the effect of additional economic factors at work in shaping the topology. The analysis is relevant to other types of geographically embedded networks and sheds light on the link formation process in the presence of spatial constraints.

The dynamic of innovation networks: a switching model on technological change

In this paper, we introduce an agent-based model where heterogeneous firms compare and modify their innovation strategies, so generating an evolving network structure. By implementing dynamic behavioral switching via a fitness mechanism based on agents’ performance, companies can endogenously modify their tactics for technological change and switch among three groups: stand-alone innovators, collaborative innovators and imitators. On the one hand, we study the properties of the emerging networks and we show that they reproduce the stylized facts of innovation networks. Moreover, we focus the analysis on the impact of these three innovation categories on the macro economic aggregate, finding that collaborative companies are those having the highest positive impact on the economic system. On the other hand, we use the model to study the effect of different economic innovation policies in increasing macroeconomic performance.

Financial fragility and distress propagation in a network of regions

Building on previous works on business fluctuations, we model the propagation of financial distress in a network of regions, each populated by heterogeneous interacting firms and banks. In order to diversify risk, firm sell goods outside their own region and borrow from banks located there. However, this results in ties across regions which propagate financial distress across regional borders. We investigate how the average level of economic integration affects the probability of both individual and systemic failures. We find that the benefit of greater diversification is eventually offset by the effect of financial acceleration and contagion. In particular, beyond a certain level of integration the economy suffers more frequently from events with larger numbers of simultaneous failures.

Sovereign Wealth Funds and Target Firms: Does ‘Networking’ Matter?

This paper analyses the impact of Sovereign Wealth Fund (SWF) equity investments on target firm operating performance. Metrics from network analysis are used to investigate whether target firms, that are better connected each other by means of the SWF investments, extract benefits from this network in terms of higher operating performance. The study dataset is made up of 507 SWF acquisition deals worldwide in the time span between 2000 and 2011. Findings indicate that more central firms in the SWF-target firm network enjoybetter operating performance. In addition, the analysis points out that operating performance is higher: (i) the larger the stake acquired, (ii) if the investment is direct and domestic, (iii) if the SWF is run by a politician. Overall, the results reveal that only when a target firm can benefit from the network of both political andcommercial connections created by SWFs, do they enjoy these benefits and gain in operating performance.

Where Has All the Trading Gone? A Network Approach to European Stock Exchanges and Alternative Trading Venue

This paper investigates the network features of European trading venues by analyzing the behavior of simultaneously quoted stock. Equity trading venues include both regulated Stock Exchanges (SEs) and Alternative Trading Venues (ATVs) and these represent the nodes of our network. The connections among these nodes are determined by choices of investors to exploit various venues in which a stock may be traded. Using trading volume data of nearly 22,000 equities we use social network analysis to measure prestige and connectivity between the various trading venues between 2005 and 2009. We find that the evolution of ATVs (including multi-lateral trading venues BATS, Chi-X and Turquoise, as well as various Systematic Internalisers) eroded the relative prestige of the largest established European SEs (particularly London). Prestige concentration also declined after MIFID although smaller SEs did not appear to suffer any major losses (in prestige). The introduction of multi-trading venues does not appear to have adversely influenced connectivity in terms of reducing the number (or volume) of cross-listed relationships although the introduction of ATVs has had a big impact in increasing connectivity overall and decreasing trades concentration.