Incentives in Corporations: Evidence from the American Whaling Industry
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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- 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.
- 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.
- 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.
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