Who's in the Forbes Global 2000? The Role of Home Market, Multinational Firms and Economic Development

• Date: 01 February 2016
• Author: Shi‐Shu Peng,Deng‐Shing Huang,Tzu‐Han Yang,Ying‐Chih Sun
• DOI: http://doi.org/10.1111/rode.12216
• Published date: 01 February 2016

Who’s in the Forbes Global 2000? The Role of

Home Market, Multinational Firms and Economic

Development

Shi-Shu Peng, Deng-Shing Huang, Tzu-Han Yang, and

Ying-Chih Sun*

Abstract

We investigate the determinants of the share of very large enterprises that a country has at the industry-

level at the industry-level, using data from the Forbes Global 2000 across 48 countries and 16 industries

in the period of 2004–2010. We find significant and positive evidence for three effects affecting such

share: the home market effect (HME), multinational firm effect (MFE) and economic development effect

(EDE). A further industry-specific analysis of the HME suggests that the industry-level degree of

increasing returns to scale may only partly explain the effects being positive without them being different

across industries.

1. Introduction

In the history of industrial evolution, we frequently observe firms rising in the early

stage of an industry, and the number of firms grows progressively, after which this

growth slows down. As this industry enters the mature stage, the number of firms

begins to decline. While most firms are forced out of this industry, there always remain

firms that are able to survive to the mature stage and last for years or even decades.

Theoretically, the firms that can survive to an industry’s mature stage should be

more competitive than others. As is found in the empirical literature, firm size and

age have a positive relationship with a firm’s growth and survival. See for example,

Hall (1987) and Lin and Huang (2008), among others. That is, the large firms in the

business history are usually those that survive to the mature stage of their industry,

and are on average larger in size and established earlier. This phenomenon suggests

the importance of large firms in shaping the world economy. In fact, as pointed out

in Gabel and Bruner (2003), the large multinationals command more resources and

exert a stronger influence than nearly three fourths of all national states.

Surprisingly, there is little literature addressing the question: what determines the

size of a firm? What follows, in the globalization era, is this question: why do some

countries have more large firms in some industries than others?

*Peng: Institute of Economics, Academic Sinica, 128, Sec. 2, Academia Road, Nangang, Taipei, 115,

Taiwan. Corresponding Author. Tel: 886-2-27822791, Fax: 886-2-2785-3946, E-mail: ssp@econ.sinica.edu.

tw. Huang and Sun: Institute of Economics, Academic Sinica, Nangang, Taipei, Taiwan. Yang:

Department of Public Finance, National Taipei University, New Taipei City, 237, Taiwan. The authors

are grateful to the anonymous referee, Matsuura Toshiyuki and Chang-Ching Lin for their valuable

comments, which greatly improved this paper. The paper has benefited from presentations at National

Taiwan University, National Taipei University, 2012 Sinica–CCER conference in Peking, Yokohama

Conference on Empirical Issues of International Trade and Firms, 2014 IEFS China Conference and 2014

Asian Meeting of the Econometric Society in Taipei.

Review of Development Economics, 20(1), 101–112, 2016

DOI:10.1111/rode.12216

©2016 John Wiley & Sons Ltd