Ownership and Control in the Entrepreneurial Firm: An International History of Private Limited Companies

63 Pages Posted: 13 Dec 2007  

Timothy W. Guinnane

Yale University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Ron Harris

Tel Aviv University - Buchmann Faculty of Law

Naomi R. Lamoreaux

Yale University; National Bureau of Economic Research (NBER)

Jean-Laurent Rosenthal

University of California, Los Angeles (UCLA) - Department of Economics

Date Written: December 2007

Abstract

We use the history of private limited liability companies (PLLCs) to challenge two pervasive assumptions in the literature: (1) Anglo-American legal institutions were better for economic development than continental Europe's civil-law institutions; and (2) the corporation was the superior form of business organization. Data on the number and types of firms organized in France, Germany, the UK, and the US show that that the PLLC became the form of choice for small- and medium-size enterprises wherever and whenever it was introduced. The PLLC's key advantage was its flexible internal governance rules that allowed its users to limit the threat of untimely dissolution inherent in partnerships without taking on the full danger of minority oppression that the corporation entailed. The PLLC was first successfully introduced in Germany, a code country, in 1892. Great Britain, a common-law country followed in 1907, and France, a code country, in 1925. The laggard was the US, a common-law country whose courts had effectively killed earlier attempts to enact the form.

Keywords: limited company, partnership, corporation, legal regime, common law, civil law

JEL Classification: N8, G3, O16, K22

Suggested Citation

Guinnane, Timothy W. and Harris, Ron and Lamoreaux, Naomi R. and Rosenthal, Jean-Laurent, Ownership and Control in the Entrepreneurial Firm: An International History of Private Limited Companies (December 2007). Yale University Economic Growth Center Discussion Paper No. 959. Available at SSRN: https://ssrn.com/abstract=1071007

Timothy W. Guinnane (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
(203) 432-3616 (Phone)
(203) 432-3898 (Fax)

HOME PAGE: http://pantheon.yale.edu/~guinnane

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ron Harris

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
972 3 6408798 (Phone)
972 3 6407260 (Fax)

HOME PAGE: http://www2.tau.ac.il/Person/law/researcher.asp?id=agihecicf

Naomi R. Lamoreaux

Yale University ( email )

27 Hillhouse
New Haven, CT 06520
United States
2034323625 (Phone)

HOME PAGE: http://www.econ.yale.edu/faculty1/lamoreaux.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jean-Laurent Rosenthal

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

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