An earlier draft of this Article was written as a background report for the Worldbank, WORLD DEVELOPMENT REPORT 2002: BUILDING INSTrrUTIONS FOR MARKErs (2001). Financial support from the World Bank is gratefully acknowledged.

Innovation in corporate law In most countries large business enterprises today are organized as corporations. The corporation with its key attributes of independent personality, limited liability and free tradeability of shares has played a key role in most developed market economies since the 19th century and has made major inroads in emerging markets. We suggest that the resilience of the corporate form is a function of the adaptability of the legal framework to a changing environment. We analyze a country's capacity to innovate using the rate of statutory legal change, the flexibility of corporate law, and institutional change as indicators. Our findings suggest that origin countries are more innovative than transplant countries.

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