Data and industry classification
PwC’s Industry Gini analysis is based on enterprise value data provided by Capital IQ, covering businesses that have been traded on an exchange at some point in time. “Enterprise value” is the value of a business’s operations calculated as the market value of equity plus debt minus cash and equivalents (in effect, what it would cost to buy the operations outright). For industry categorization, Capital IQ’s “sub-industry” level is used due to its balance of uniformity and breadth of competitors within each sub-industry. Of 158 sub-industries, 94 had sufficient data.
Scope and time period
Given the focus on industry dominance issues, the analysis covers each sub-industry’s top 10 businesses as measured by enterprise value, which captures the collective wisdom about a business’s strength. Analyzing competition issues requires limiting scope to competitors within a market, selected to be the US market, which constitutes a defined, critical segment with prevalent head-to-head competition. The analysis starts in 2006, the last year before the build up to the global financial crisis started impacting financial data, and ends 10 years later.
The Industry Gini Index is based on the Gini Coefficient, a commonly-used measure of inequality across a group. Published in 1912 by Corrado Gini, the Gini Coefficient is best known for uses in economic studies that measure income inequality within nations, and the underlying mechanics make it applicable across types of data. Its value ranges from 0 to 1, reflecting the extent that the group has perfect equality (0) or inequality (1). The index's Gini Coefficient calculations were run via the analytic equation developed by Angus Deaton, who won the 2015 Nobel Prize in Economic Sciences for related work.