Business enterprises, particularly large corporations, are closely woven into the fabric of modern society. Individual corporations go through life cycles of birth, growth, maturity, and death akin to the life cycles of people.
In a Business Network topical meeting, “The Natural History of the Corporation,” SFI and Network members explored the evolution and historical origins of the modern corporation, along with the corporate life cycle, the impact of increasing globalization, and the relationship between corporations and other major social institutions.
The meeting took place September 30 at the London offices of global professional and financial services company Towers Watson.
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Image caption: Sizes of some 30,000 companies traded publicly on U.S. markets from 1950-2009, measured by their sales (controlling for inflation and GDP growth). The relatively rapid growth of smaller companies near the beginnings of their lifespans account for the ragged lower portion of the chart, as well as the relatively steep initial sales increases. As companies reach maturity and as markets become saturated, their sales tend to level off. (Courtesy Marcus Hamilton and SFI’s Cities, Scaling, and Sustainability team)
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While parallels may be drawn between the human and corporate life cycles, there are also important differences. For example, corporate death is not necessarily inevitable, and corporations can experience rebirth through new technology and continual re-invention.
Business Network member Tim Hodgson, a senior investment consultant at Towers Watson, says understanding the life cycle of corporations is fundamental to his business because investment decisions are based on whether or not the market pricing of a security accurately reflects the company’s position in that cycle.
Chris Wood, SFI vice president for administration and director of the Business Network, notes that this meeting provides an opportunity for SFI to engage with its UK and European members and apply the principles of complexity science to a fresh perspective on the modern corporation.
More about the SFI Business Network topical meeting here.