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The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602-1623

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Author Info

  • Oscar Gelderblom
  • Abe de Jong
  • Joost Jonker

    (Universiteit Utrecht and Erasmus University Rotterdam)

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    Abstract

    With their legal personhood, permanent capital with transferable shares, separation of ownership and management, and limited liability for both shareholders and managers, the Dutch East India Company (VOC) and subsequently the English East India Company (EIC) are generally considered a major institutional breakthrough. Our analysis of the business operations and notably the financial policy of the VOC during the company’s first two decades in existence shows that its corporate form owed less to foresight than to constant piecemeal engineering to remedy original design flaws brought to light by prolonged exposure to the strains of the Asian trade. Moreover, the crucial feature of limited liability for managers was not, as previously thought, part and parcel of that design, but emerged only after a long period of experimenting with various, sometimes very ingenious, solutions to the company’s financial bottlenecks.

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    File URL: http://www.cgeh.nl/sites/default/files/WorkingPapers/CGEH%20WP%20No36%20Gelderblom%20deJongJonker%2008%202012.pdf
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    Bibliographic Info

    Paper provided by Utrecht University, Centre for Global Economic History in its series Working Papers with number 0036.

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    Length: 61 pages
    Date of creation: Aug 2012
    Date of revision:
    Handle: RePEc:ucg:wpaper:0036

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    Postal: University of Utrecht, Drift 10, The Netherlands
    Web page: http://www.cgeh.nl
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    Related research

    Keywords: Dutch East India Company (VOC); corporate governance; Dutch Republic; financial markets; colonial expansion;

    This paper has been announced in the following NEP Reports:

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    1. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June.
    2. Ross Levine, 2004. "Finance and Growth: Theory and Evidence," NBER Working Papers 10766, National Bureau of Economic Research, Inc.
    3. Timur Kuran, 2010. "The Scale of Entrepreneurship in Middle Eastern History: Inhibitive Roles of Islamic Institutions," Working Papers 10-14, Duke University, Department of Economics.
    4. S R H Jones & Simon P Ville, . "Efficient Institutions or Rent Seeking Monopolists? The Rationale for Early Chartered Trading Companies," Working Papers ec7/95, Department of Economics, University of Lancaster.
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