Everyone knows that population ageing will hit Japan and Europe more than it will affect the United States. Funny thing, it is a similar story for corporate demographics. Both Japan and Europe have had much less births of global corporate champions than the US these past decades, according to Nicolas Veron.
Veron has produced an interesting story based on his analysis of the Financial Times Global 500 ranking which comprises the world’s 500 largest companies by market capitalization. Even the 500th-ranked company has a market value of $20 billion. The FT500 is geographically fairly balanced with 156 coming from Europe, 178 from the US, 44 from Japan and 122 from the rest of the world.
The sectoral breakdown is also of interest:
-- For Europe: 22 per cent of its global champions are in banking and finance; 17 per cent in manufacturing; 14 per cent in oil, gas and mining; 13 per cent in consumer products and services; and 10 per cent in energy services and utilities;
-- For the US: 24 per cent are in manufacturing; 15 per cent in banking and finance; 15 per cent in consumer products and services; 12 per cent in health and life sciences; and 10 per cent in oil, gas and mining.
-- For Japan: 38 per cent are in manufacturing; 17 per cent in banking and finance; 17 per cent in consumer products and services; 10 per cent in telecoms and media.
The interesting part of the story is that in contrast to Japan and Europe, the US has continuously produced new corporate champions since the Industrial Revolution. About one-third of its champions were born after 1945, with 14 per cent being born in the last quarter of the 20th century, mainly in the high-tech sectors and low/mid-tech services.
Some 78 per cent of Europe’s corporate champions date from before the First World War. Only 12 European global champions were created after 1950, and only 3 in the last quarter of the 20th century. Within Europe, a broadly similar picture emerges for the following countries and groups – Nordics, UK/Ireland, Germany, France and the Mediterreans.
The Japanese story is a similar one to Europe. Only 2 of its corporate champions were born after 1975, and even they are not independent creations (NTT DoCoMo and Yahoo! Japan). Sumitomo traces its origins back to the creation of the Sumitomo store back in 1640!
For the emerging world, a predictably more dynamic picture emerges. Over half of its corporate champions were born in the second half of the 20th century and one-fourth in the last quarter of the 20th century.
It is easy fire shots at analysis like this. How do you define the birth of a company in this wild world of mergers and acquisitions, and company spin-offs? How do you identify the nationality of corporate champions when multinational enterprises operate world wide, and often do more business away from their home base than at home? And large enterprises surely have the capacity to re-create themselves – the manufacturing giant GE is by some estimates one of the world’s biggest banks thanks to its financial activities.
Nevertheless, this data does square with the fact that Japan and Europe have long had weaker innovation performances than the US, and that the growth potential of the services sector in these economies is hampered by excessive restrictive regulations. Small and medium-size enterprises, some of which may grow up to be corporate champions, are at a particular disadvantage especially when it comes to obtaining finance.
In this context, it is instructive to examine the 47 non-oil new corporate champions born in the US since 1950. They fall into two broad group, being 20 high-technology firms (in electronics, medical technology, software, biotech and Internet services) and 23 services companies (in finance, retail, entertainment, business services and health services).
This is the template for the Japan and Europe that might have been – and could still be -- if governments get their acts together!
References:
“The Demographics of Global Corporate Champions”, by Nicolas Veron. Breugel Working Paper, No. 2008/03. www.breugel.com
“Financing Europe’s Fast Movers”, by Thomas Phiippon and Nicolas Veron. Bruegel Policy Brief, Issue 2008/01, January 2008. www.breugel.com
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