In a world of globalization – company valuations of industrial corporates and digital natives

Abstract

When Brian Arthur referred to a “split” globalized business world in 1996, he distinguishes between industrialized companies from the “Marshall” world and networked technology companies in a world of complexity. By transferring this fundamental split to the era of digitalization superseding the era of industrialization, the question whether digital native companies outperform industrial corporates remains unanswered. Therefore, by using the financial concept of PVGO for company valuations and cluster analysis, the present paper tests the H0 hypothesis of the non-existence of digital native companies which drive market valuations beyond 1 trillion USD. One of the first key results of this paper reveals a clear tendency of digital native companies to dominate market valuations of equity, based on extra-ordinary high PVGO growth rates. Meanwhile, industrial companies exhibit a clear trend towards high PVEA rates which originate from stable cash flows of existing assets. This leads to the rejection of the H0 hypothesis and to the following conclusion: As the economic dominance of the digital players is reflected in concentrated market valuations, digital native companies outperform their industrial peers according to the notion that “the winner takes it all”.