The Emergence of the Corporate Form

49 Pages Posted: 26 Feb 2013 Last revised: 2 Feb 2017

See all articles by Giuseppe Dari‐Mattiacci

Giuseppe Dari‐Mattiacci

University of Amsterdam; Tinbergen Institute; European Corporate Governance Institute (ECGI)

Oscar Gelderblom

University of Antwerp; Utrecht University

Joost Jonker

Utrecht University

Enrico C. Perotti

University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2013


We describe how, during the 17th century, the business corporation gradually emerged in response to the need to lock in long-term capital to profit from trade opportunities with Asia. Since contractual commitments to lock in capital were not fully enforceable in partnerships, this evolution required a legal innovation, essentially granting the corporation a property right over capital. Locked-in capital exposed investors to a significant loss of control, and could only emerge where and when political institutions limited the risk of expropriation. The Dutch East India Company (VOC, chartered in 1602) benefited from the restrained executive power of the Dutch Republic and was the first business corporation with permanent capital. The English East India Company (EIC, chartered in 1600) kept the traditional cycle of liquidation and refinancing until, in 1657, the English Civil War put the crown under strong parliamentary control. We show how the time advantage in the organizational form had a profound effect on the ability of the two companies to make long-term investments and consequently on their relative performance, ensuring a Dutch head start in Asian trade that persisted for two centuries. We also show how other features of the corporate form emerged progressively once the capital became permanent.

Keywords: corporate form, legal personality, limited liability, permanent capital, lock-in

JEL Classification: G30, K22, N24

Suggested Citation

Dari-Mattiacci, Giuseppe and Gelderblom, Oscar and Jonker, Joost and Perotti, Enrico C., The Emergence of the Corporate Form (February 25, 2013). Forthcoming in "Journal of Law, Economics & Organization", Amsterdam Law School Research Paper No. 2013-11, Amsterdam Center for Law & Economics Working Paper No. 2013-02, Available at SSRN: or

Giuseppe Dari-Mattiacci (Contact Author)

University of Amsterdam ( email )

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Tinbergen Institute ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Oscar Gelderblom

University of Antwerp ( email )

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Utrecht University ( email )


Joost Jonker

Utrecht University ( email )

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Enrico C. Perotti

University of Amsterdam - Finance Group ( email )

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Amsterdam, 1018 TV
+31 20 525 4159 (Phone)
+31 20 525 5285 (Fax)


Centre for Economic Policy Research (CEPR)

United Kingdom

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