Disclaimer: Views expressed by panelists are their own and do not represent the position of the World Bank.
Disclaimer: Views expressed by panelists are their own and do not represent the position of the World Bank.
Many economists think that in the absence of any government intervention, markets naturally become competitive, and that being bigger is associated with being better. However, superstar firms are increasingly receiving attention from policymakers.
There is much to celebrate when it comes to the rise of stars: they accelerate growth because they are the most productive and are at the forefront of adopting new technologies, they achieve economies of scale, drive out inefficient firms, and lower prices for customers. But there is much to be concerned about too.
Technology and globalization create opportunities for firms to become stars, but the risk of market concentration increases, and frequently firm margins increase significantly. Anti-competitive behavior is difficult to identify in the digital economy. Network effects often benefit early adopters of technology, giving significant market power to incumbents.
There are also concerns that the significant fiscal support to fight the COVID-19 crisis will lead to greater concentration of power and firm size globally, further muffling competition in the recovery phase. Better understanding of these forces is very important in designing competition policies that are essential to improving productivity and growth.
Luigi Zingales is Robert C. McCormack Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business. His research interests span from corporate governance to financial development, from political economy to the economic effects of culture. He co-developed the Financial Trust Index, which is designed to monitor the level of trust that Americans have toward their financial system. In addition to holding his position at Chicago Booth, Zingales is currently a faculty research fellow for the National Bureau of Economic Research, a research fellow for the Center for Economic Policy Research, and a fellow of the European Governance Institute.
Vojislav Maksimovic is the William A. Longbrake Chair in Finance and Professor of Finance. His recent research focuses on how a firm's organizational structure affects the flow of resources across its divisions. He has also worked on how competition in high technology industries determines the timing of initial public offerings. Maksimovic is interested in international finance, specifically in how a country's legal and institutional environment influences the financing and investment by firms. Maksimovic's research has been published in the Journal of Finance, Review of Financial Studies, Rand Journal of Economics, Journal of Financial Economics, and Journal of Financial and Quantitative Analysis.
Sandeep Mahajan is a Practice Manager in the World Bank’s Macroeconomic, Trade, and Investment Global Practice, responsible for the Europe and Central Asia region. He has held various positions at the World Bank, including adviser to the World Bank’s Managing Director and Senior Vice President for Operations, Lead Economist for Vietnam and South Africa. Sandeep has led the Bank’s policy dialogue with client countries on a broad range of economic management issues, managed large budget support operations, and undertaken substantial and innovative analytical work on several challenging development issues.