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Incentives in Corporations: Evidence from the American Whaling Industry

  • Hilt, Eric

In the 1830s, when whaling was a prosperous American industry, a number of whaling corporations were chartered. All of them were short-lived. This paper analyzes the failure of corporations in the American whaling industry and argues that the corporate form was unable to create the incentives requisite for success in whaling. Most nineteenth-century whaling ventures were owned by a small number of local investors and were configured to provide powerful incentives for their managers. The effect of the corporate form on productivity is analyzed using a newly collected panel data set of 874 whaling voyages. Many whaling corporations were managed by individuals who had previously (or would subsequently) manage ventures with the usual ownership structure. Using an individual fixed effects framework, I identify a strong negative effect of the corporate form on productivity.

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File URL: http://dx.doi.org/10.1086/504057
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Article provided by University of Chicago Press in its journal Journal of Law and Economics.

Volume (Year): 49 (2006)
Issue (Month): 1 (April)
Pages: 197-227

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Handle: RePEc:ucp:jlawec:y:2006:v:49:i:1:p:197-227
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. Elmo P. Hohman, 1926. "Wages, Risk, and Profits in the Whaling Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 40(4), pages 644-671.
  2. Himmelberg, C.P. & Hubbard, R.G. & Palia, D., 1997. "Understanding the Determinants of Mangerial Ownership and the Link Between Ownership and Performance," Papers 97-21, Columbia - Graduate School of Business.
  3. Lance E. Davis & Robert E. Gallman & Karin Gleiter, 1997. "In Pursuit of Leviathan: Technology, Institutions, Productivity, and Profits in American Whaling, 1816-1906," NBER Books, National Bureau of Economic Research, Inc, number davi97-1, September.
  4. Allen, Douglas W & Lueck, Dean, 1998. "The Nature of the Farm," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 343-86, October.
  5. Albion, Robert G., 1941. "Early Nineteenth-Century Shipowning—A Chapter in Business Enterprise," The Journal of Economic History, Cambridge University Press, vol. 1(01), pages 1-11, May.
  6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  7. Ellickson, Robert C, 1989. "A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 83-97, Spring.
  8. Boyce, Gordon, 1992. "64thers, Syndicates, and Stock Promotions: Information Flows and Fund-raising Techniques of British Shipowners Before 1914," The Journal of Economic History, Cambridge University Press, vol. 52(01), pages 181-205, March.
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