McKinsey Global Institute

A new look at how corporations impact the economy and households

We map the different ways in which the economic value that large companies create flows to households in OECD economies and examine what has changed in the past quarter-century.

The role of companies in the economy and their responsibilities to stakeholders and society at large has become a major topic of debate. Yet there is little clarity or consensus about how the business activity of companies impacts the economy and society. In this discussion paper, the first in a series on companies in the 21st century, we assess how the economic value that companies create flows to households in the 37 OECD countries, and how these flows have shifted over the past 25 years. We identify patterns in what different types of companies do and how they do it, and how the mix of these companies and their patterns of economic impact have changed.

At its core are two analyses: The first maps all the pathways through which a dollar of company revenue reaches households—not just traditional measures of labor and capital income but also less-discussed aspects such as consumer surplus and supplier payments. The second is an algorithmic clustering of companies into eight “archetypes,” based on what they do and their impacts on society. This clustering transcends traditional sectoral views and highlights the similarities and differences between companies in how they affect households. For both analyses, we seek to understand the situation today and how it has changed over the past 25 years.

The business sector overall contributes 72 percent of GDP in the OECD, and corporations with more than $1 billion in revenue account for an increasingly large share of that

A starting point for our research is the steady contribution of business to the economy. Among OECD economies, business activity – the value added from businesses of any size or formality including corporations, partnerships, and sole proprietorships – accounts for 72 percent of GDP. The remainder comes mainly from government, non-profit activity, and household incomes from real estate (Exhibit 1).

Business contribution to economy
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Measured in GDP per capita, the contribution of the entire business sector has tripled since 1960 on average in major OECD economies, in proportion with their overall economic growth. Companies underpin 85 percent of technology investment and 85 percent of labor productivity growth since 1995, a larger proportion than their GDP contribution.

The size of the business sector varies only slightly within each of the major economies, and their share has remained steady for the past 60 years. This steadiness masks significant underlying shifts, notably including the growth of corporations over $1 billion in revenue, which increased their global revenues by 60 percent relative to their home country’s GDP since 1995.

Economic value flows from companies to households via eight pathways, of which labor income and consumer surplus are the largest direct pathways

The overall business sector in the OECD, described above, includes companies of all types and represents $44 trillion in gross value added. For much of this paper, we narrow our focus to a subset of large corporations in the OECD with revenue exceeding $1 billion—about 5,000 companies in all, which together had $40 trillion in revenue and represented $17 trillion in gross value added in 2018.

Using this data set, we identify eight pathways through which economic value from corporations flows to households and the economy (Exhibit 2).

Corporate economic gains
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Five are directly measurable monetary flows: labor income, capital income, taxes, investment in capital assets, and payments to suppliers. The money flowing through the supplier payment and investment pathways passes through other companies to reach households and the economy.

The sixth is consumer surplus (the difference between what consumers are prepared to pay and what they do pay), which we estimate.

The final two pathways are negative and positive spillovers, which we do not assess comprehensively beyond the examples of environmental impact and contributions to total factor productivity growth (unaccounted for in additional labor or capital input).

We find labor income is the largest direct pathway, with wages and benefits accounting for $0.25 of each dollar of revenue. Just over half, $0.58 on every dollar, goes to suppliers (themselves companies large and small), reflecting the role they play in enabling corporations to create and deliver their products and services.

The other significant pathway is consumer surplus, which we estimate to be about $0.40 per dollar of revenue.

These pathways have changed over the past 25 years. Among the key changes: capital income has grown while labor income and supplier payments declined.

Comparing two periods, 1994-96 and 2016-18, the biggest change has been a two-thirds increase in the capital income pathway, from $0.04 to $0.07 per revenue dollar. Applied to the $40 trillion in revenue represented by our large company data set, this $0.03 difference amounts to an increase in capital income of $1.2 trillion.

The labor income pathway shrank by $0.02, or 6 percent. Labor per dollar of revenue fell by 15 percent and wages grew only 11 percent. Productivity gains amounted to 25 percent in real terms, significantly more than wage growth, which gains from labor productivity went predominantly to capital income.

Investment in intangible assets grew more than threefold as a proportion of revenue in this period, while investment in tangible assets dropped by half.

Supplier payments also fell by $0.02, or 4 percent. The decline was especially steep for suppliers that were small and midsize enterprises, which saw a 10 percent drop in share of payments to suppliers in the United States, with similar patterns in other countries. The share going to domestic suppliers in each country also fell; about half of this decrease in supplier payments moved to foreign OECD suppliers and the other half to non-OECD suppliers.

The tax pathway held steady overall as decreases in corporate taxes, especially in the United Kingdom and the United States, were offset by slight increases in production taxes, especially in Japan, and corporate income tax in France.

Clustering companies by how they do what they do reveals eight distinct company archetypes that differ in their patterns of impact on the economy and households

We clustered the large corporations into eight archetypes: Discoverers, Technologists, Experts, Deliverers, Makers, Builders, Fuelers, and Financiers. We based the clustering on the companies’ factor inputs (for example, labor and both physical and intangible capital), how they create economic value (for example, cost structure and R&D spending), and their relative impacts on the economy via the eight pathways.

Some of the eight, including Fuelers and Financiers follow traditional sector lines, but others look quite different.

  • Discoverers have high R&D, intellectual property, and capital income. They include pharmaceutical and biotechnology companies as well as some household products companies that rely heavily on R&D and intellectual property to differentiate their products.
  • Deliverers have high employment levels and large supplier costs typical of retail and distribution. They include some manufacturers, such as footwear and luxury apparel companies, that also have high marketing costs; while Deliverers account for 16 percent of revenue, they employ 29 percent of workers in our data set of large corporations.
  • Technologists—who range across hardware, software, digital retailers, and media—have high R&D and have enabled productivity growth in the economy; they have also contributed to consumer surplus through steep price reductions (as well as quality improvements) over time.
  • Experts include for-profit hospitals, health services, business service companies, and private universities, among others. Experts particularly rely on high-skill workers and devote the highest share of their value added to employee compensation.
  • Fuelers are oil, gas, and coal companies that extract, distribute, and sell fuel. They make large physical investments, have the highest labor productivity and wages, pay the highest production taxes, and have the highest emissions.
  • Financiers are banks, insurance, and real estate companies. They help price risk and provide capital and financial services for economic activity of households, businesses, commercial ecosystems, and government. They have the highest total capital income of all archetype and the highest taxes. They also pay high wages.
  • Builders include utility, telecommunications, and transportation companies that construct, use, and operate physical infrastructure, as well as manufacturers of materials and chemicals. They have double the physical assets of the average and, along with Fuelers, the highest scope 1 and 2 emissions.

Other manufacturers are clustered in Makers, which is the largest archetype, accounting for about 25 percent of the revenue of all companies and 27 percent of employment. Makers are close to or above average in their impacts across all the pathways, making their contribution through each pathway high and larger than most in absolute terms. Their employment intensity, just above average across the archetypes, combines with high wages to make their labor income among the largest of all archetypes, 20 percent above average. They have also contributed to consumer surplus through price reductions for some goods such as automotive and textiles.

While the characteristics of archetypes are consistent across countries, their prevalence differs. For example, Makers account for more than one-third of the total revenue from companies in Germany and Japan but just one-fifth in the United States, which has the largest proportion of Technologists (Exhibit 3).

The share of total revenue of each archetype differs as viewed by country.
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Changes in the mix of archetypes explain most of the decline in labor income, while evolution of archetypes explains most of the increase in capital income, consumer surplus, and supplier payments

Makers and Builders were long the predominant archetypes and mainstays of industrial economies, but their share of total revenue among large corporations has dropped sharply in the past quarter-century, falling by 12 and two percentage points, respectively. The share of revenue for Discoverers shrank slightly, while all other archetypes expanded their relative share, with Financiers, Experts, and Deliverers growing the most.

Such shifts in the relative size of the archetypes have affected the pathways. For example, the archetypes whose revenue has grown in share have lower labor income contributions on average than those shrinking in share, especially Makers. This change accounts for two-thirds of the overall labor income decline across companies.

The evolution of archetypes also results in pathway shifts. The smaller labor income pathway also stems from a sharp drop in employees per dollar of revenue in the past 25 years (a fall of 30 to 40 percent in constant dollar terms) for Experts, Fuelers, and Builders. This decline in employees per revenue dollar outweighed positive real wage growth of all three archetypes. The three also had the lowest capital income growth even as they widened their supplier payments pathway.

Conversely, Technologists, Financiers, and Discoverers had the highest growth in the capital income and labor income pathways as they widened their share of gross value added and decreased their supplier payments. While all archetypes delivered greater capital income, these three archetypes alone accounted for two-thirds of the total growth of the capital income pathway on a per-revenue-dollar basis.

One of the biggest positive impacts for all households has been the growth in consumer surplus, primarily from Technologists and Makers, whose prices dropped by 50 percent and 20 percent, respectively, and whose volumes grew the most in absolute terms.

In general, core attributes of each archetype have become more pronounced over the past 25 years. For example, Technologists and Discoverers increased their stock of intangibles, R&D expenditures, and capital income more than other archetypes. Deliverers increased their employment share by nine percentage points, the largest by far. Fuelers added physical capital assets, while most others reduced them. Experts increased wages almost 40 percent, the biggest rise.

High-income households have benefited the most from the patterns and shifts in the economic impact of corporations over time, but with some country variations

The top ten percent of households in the United States increased their share of capital income to 66 percent in 2018, from 59 percent in 1995, and received 30 percent of their income through the capital income pathway. This compares with 26 percent in Germany and 23 percent in Japan, where households are less reliant on corporate returns and more reliant on public pensions.

Labor income has also concentrated slightly to higher-income households since 1995. Clicking the interactive exhibit below allows for a comparison of how labor income, capital income, and taxes flow to different household segments in Germany, Japan, and the United States.


For consumers, price increases in healthcare and education narrowed the consumer surplus pathway provided by Experts and Discoverers, especially to lower-income households. All households have benefited from steady or declining prices of the tradable goods of Makers and the products of Technologists, as gains from innovation are passed on to consumers. However, the top quintile of households has expanded its share of total consumer expenditure partly because these households are able to afford the higher costs of healthcare, education and housing, while lower-income households have faced the challenge of more of their income going to the rising costs of these essentials.

The changing impacts of corporations on households have important implications and will require further research

Netting it out (so far), we find that what has remained true over the past quarter-century (and longer) is that business activity, including that of corporations, continues to be the dominant contributor to the economy and its growth. However, a lot has changed in the patterns of impact, as some pathways have shrunk while others have grown, and some corporate archetypes have become more prevalent and others less so.

These changes have important implications for the economy and its stakeholders, especially households. Furthermore, this research (and its gaps) raises questions for further research as well as considerations for leaders, especially in business and policy. Companies, for example, could use this research to better understand the patterns and implications of their own impact on the economy and stakeholders. Policy leaders could consider the impact in their economies and how to accentuate the positives, capture opportunities, and address challenges.

We plan to pursue some of these questions in our future research. In the meantime, we welcome discussion of the findings in this paper.

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