The Pandemic Will Make Big Companies More Dominant Than Ever

The Covid-19 pandemic will likely leave us with an economy in which larger companies play an expanded role, representing a higher share of both employment and revenue. The stock market illustrates the phenomenon: The biggest firms have seen smaller stock market declines, on average, than smaller ones have. It’s the corporate version of the Matthew effect: The strong get stronger.

This shift began before the pandemic came along. From 1995 to 2013, the share of U.S. workers employed by firms with 10,000 or more employees increased to about 28%, from 24%. McKinsey has found that “superstar” firms (whose average revenue is seven times the median) raised their employment share to 30% in 2014-16, from 28% in 1995-97. There’s been much debate over why this is happening, especially the role that higher productivity plays. The International Monetary Fund recently concluded that “technology-driven changes in the structure of many product markets” have made a bigger difference than have individual countries’ regulations or antitrust policies.