Innovation in Corporate Law

Abstract

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.

Corporate Governance and Human Resource Management

“…Firstly, it has been argued that the empirical foundation of this approach is conveniently founded on periods when common law countries were performing particularly well, and an analysis of earlier decades would have yielded very different results [Wood, 2011]. Secondly, within common law countries, key dimensions of corporate law, most notably surrounding bankruptcy, have arisen from legislation, rather than judicial decisions; quite simply, legal traditions are complex, and there is always an element of uncertainty to how laws evolve [Davis and Kruse, 2007]: there is a tendency for innovation in the development of corporate law [Pistor et al, 2003]. The same goes for key dimensions of labour legislation, such as the minimum wage in the United Kingdom [Deakin et al, 2007].…”

Finance, growth and fragility: the role of government

“…Third, and as a consequence of the previous point, there is a stronger reliance on bright-line laws to limit the role of the courts. Once a country adopts the bright-line approach to lawmaking, this can lead into a trap, as courts will not be challenged to develop legal procedures and methods to deal with new circumstances, thus retarding the development of efficiently adaptive legal systems (Pistor et al, 2002(Pistor et al, , 2003. By the same token, Common Law systems can be persistent, given the high social reputation of judges attracting talent to this profession and the role of jurisprudence allowing for a vibrant legal debate fostering legal innovation.…”

Legal Institutions and Economic Development

“…Once a country adopts the "bright line" approach to law making, it is very difficult to change, as courts will not be challenged to develop legal procedures and methods to deal with new circumstances thus retarding the development of efficiently adaptive legal systems (Pistor et al , 2003.…”