‘Superstars’: The dynamics of firms, sectors, and cities leading the
global economy PART II
3. The dynamics of sectors
For sectors, we analyze
24 sectors of the global economy that encompass all private-sector business
establishments. We find that 70 percent of gains in gross value added and gross
operating surplus have accrued to establishments in just a handful of sectors
over the past 20 years. This is a contrast to results in previous decades, in
which gains were spread over a wider range of sectors.
While the superstar
effect is not as strong for sectors as it is for firms, the superstar sectors
over the past 20 years we have identified include financial services,
professional services, real estate, and two smaller (in gross value added and
gross operating surplus terms) but rapidly gaining sectors: the pharmaceuticals
and medical-products sector and the internet, media, and software sector.
The shift in global
surplus to today’s superstar sectors amounted to nearly $3 trillion in 2017 alone
across the G-20 countries. As today’s superstar sectors have gained share of
gross value added and gross operating surplus globally, other sectors, such
as infrastructure, consumer goods, and
capital goods, have lost share. In addition to global superstar sectors, we
identify regional superstar sectors in which the dynamics are more localized.
Regional superstar sectors include automobile and machinery production in
China, Germany, Japan, and South Korea; construction in China, India, and the
United States; hospitality services in France, Italy, and the United Kingdom;
and, recently, resource production in Canada and the United States.
Today’s superstar sectors
share one or more of the following attributes: fewer fixed capital and labor
inputs, more intangible inputs, and higher levels of digital adoption and
regulatory oversight than other sectors (Exhibit 4). With the exception of real
estate, superstar sectors are two to three times more skill intensive than sectors
declining in share of income in the G-20 countries are.
In addition, superstar
sectors tend to have relatively higher R&D intensity and lower capital and
labor intensity than other sectors do. The higher returns in superstar sectors
accrue more to corporate surplus rather than labor surplus, flowing to
intangible capital, such as software, patents, and brands. Although some
superstar sectors have stronger multiplier effects on economic growth than
declining sectors do, their gains are more geographically concentrated compared
to sectors in relative decline. For instance, gains to internet and media
activities are captured by just 10 percent of US counties, which account for 90
percent of GDP in that sector.
4. The dynamics of cities
For cities, we analyze
3,000 of the world’s largest cities, each with a population of at least 150,000
and GDP (adjusted for purchasing power parity) of at least $125 million, that
together account for 67 percent of world GDP. By our definition, 50 cities,
including Boston, Frankfurt, London, Manila, Mexico City, Mumbai, New York,
Sydney, Sao Paulo, Tianjin, and Wuhan, are superstars (Exhibit 5). The 50
cities account for 8 percent of global population, 21 percent of world GDP, 37
percent of urban high-income households, and 45 percent of headquarters of firms with more than $1 billion in annual
revenue. The average GDP per capita in these cities is 45 percent higher than
that of peers in the same region and income group, and the gap has grown over
the past decade.
Emerging-market superstar cities
have increased their contribution to global GDP by 30 to 40 percent in the past
decade, while advanced-economy superstar cities have increased their share of
global GDP by 20 to 30 percent. Over the past decade, we find a 25 percent
churn rate among superstar cities as some advanced-economy cities, such as
Rome, San Diego, and Vienna, have been displaced by emerging-market cities,
such as Jakarta, Kuala Lumpur, and New Delhi, with stronger income and
population growth relative to peers in the same region and income group. The growth
of superstar cities is fueled by gains in labor income and wealth from
real-estate and investor income, yet many show higher rates of income inequality within
the cities than peers do.
Superstar cities share
some characteristics in addition to their economic size and incomes. Of the 50
superstar cities, 31 are ranked among the most globally integrated cities, 27 among
the world’s 50 most innovative cities, 26 among the world’s top 50 financial
centers, and 23 among the world’s 50 “digitally smartest”
cities. Additionally, 22 of the superstar cities are national and regional
capitals, and 22 are among the world’s largest container ports.
At the same time, a
notable number of superstar cities (and not just the city-states) have a
disproportionate share of their national income given their share of the
population. In addition to the 50 global superstars, we identify more than 75
regional superstar cities that are smaller but share many of these
characteristics and could become global economic hubs in the future.
5. Questions for further research and preliminary
implications
Our analysis so far
raises questions for further research. For instance, we find that many
suggested explanations of the superstar effect, such as productivity growth,
technological or regulatory advantage, and intangible investments, do not fully
or individually account for the phenomenon. What combination of factors leads
to the emergence of superstar firms, sectors, and cities? How much of the
superstar effect among firms is due to changes in the macroeconomy, including
changes in value associated with different types of inputs and outputs, or to
the wider accessibility of large global markets and low interest rates? How
much is due to firm-specific investments in R&D and intangibles? What is
the economic impact, both positive and negative, of superstars on innovation
and competition, jobs and wages, investment and productivity, growth of smaller
firms, consumer surplus, and overall prosperity and inclusive growth?
We also find linkages
among firms, sectors, and cities that might be reinforcing superstar status and
that raise the question of whether a “superstar ecosystem” might exist. For
example, superstar sectors generate surplus mostly to corporations rather than
to labor, driving a geographically concentrated wealth effect in superstar
cities with a disproportionate share of asset-management activity and
high-income-household investors. Labor gains from superstar sectors are also
concentrated in narrow geographic footprints, often in superstar cities, and
accrue mostly to high-skill workers.
But counter
observations also raise questions. For example, why do some superstar sectors
but not others produce superstar firms? What explains superstar firms in
declining sectors? Why do some superstar sectors and firms thrive despite their
low digital intensity, low R&D intensity, or low levels of cross-border
trade and investment activity?
While further research
is needed to inform implications properly for companies and policy makers,
these findings already suggest some competitiveness and value-creation
imperatives for companies and raise questions policy makers should consider.
For example, for companies, it is easy to fall and possible to rise; productivity
matters (but is not enough), as do inorganic growth, intangibles, and
attracting talent; and while being in
the right sector and geography helps, being in a declining sector can be
overcome. Ultimately, though, for companies, value creation matters more than
size for its own sake.
The growth of superstar
firms, sectors, and cities also creates policy questions beyond the causes of
superstars and their effects on competition and market structure. These
considerations include implications for inclusive economic growth that can
support and sustain broad-based employment and wage growth.
The findings in this
paper are by no means the last word on the topic of superstars. Indeed, we have
highlighted questions that require further research to inform smart policies by
policy leaders and winning strategies by business leaders, all with the goal of
not only value creation but also more inclusive growth and shared prosperity.
By James Manyika, Sree Ramaswamy, Jacques Bughin, Jonathan Woetzel, Michael Birshan, and Zubin Nagpal
https://www.mckinsey.com/featured-insights/innovation-and-growth/superstars-the-dynamics-of-firms-sectors-and-cities-leading-the-global-economy?cid=other-eml-alt-mgi-mck-1810&hlkid=8a04f01869f44681bbb98be9f2f7a5be&hctky=1627601&hdpid=ce68426e-3115-4647-bf48-9d0ec4d8260c
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