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Business Groups and the Natural State

Richard Langlois ()

No 2010-29, Working papers from University of Connecticut, Department of Economics

Abstract: Recent revisionist accounts of corporate governance in both business history and finance are challenging the tradition narrative, associated with Berle and Means (1932) and Alfred Chandler (1977), in which the American model of diffuse ownership and coherent diversification is both an inevitable outcome of economic development and perhaps a normative standard for the world to follow. This essay is an attempt to rethink that narrative in light of the continued significance of the pyramidal business group as a governance structure around the world. Drawing on the North, Wallis, and Weingast (2009) theory of the state, I argue that the evolution of corporate governance can be understood only in institutional terms and that institutional development is driven by the coalitional structure of the polity. This is true as much in open-access orders like the U. S. as in the “natural states” that rule most of the world. In the end, I endorse the view that the much-discussed and oft-misunderstood exceptionalism of the U. S. in corporate governance has its roots of the differential effect on the U. S. of the collapse of globalization during the middle years of the twentieth century.

Keywords: Business groups; corporate governance; diversification; pyramids; theory of the state. (search for similar items in EconPapers)
JEL-codes: G38 H10 K22 L22 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-11
New Economics Papers: this item is included in nep-his
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Journal Article: Business groups and the natural state (2013) Downloads
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