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The States as a Laboratory: Legal Innovation and State Competition for Corporate Charters

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  • Roberta Romano

Abstract

Corporate law is an arena in which the metaphor of the states as a laboratory describes actual practice, and, for the most part, this is a laboratory that has worked reasonably well. The goal of this paper is to map out over time the diffusion of corporate law reforms across the states. The law-making pattern we observe indicates a dynamic process in which legal innovations originate from several sources, and a period of legal experimentation that tends to identify a statutory formulation that is adopted by the vast majority of states. Delaware and the Model Act quite often work in tandem. But there are occasions when they advance differing legal rules, accounting for some of the diversity in corporation codes that we observe. Prepared for the Conference on Promoting the General Welfare: American Democracy and the Political Economy of Government Performance at the University of Virginia, November 12-13, 2004.

Suggested Citation

  • Roberta Romano, 2005. "The States as a Laboratory: Legal Innovation and State Competition for Corporate Charters," Yale School of Management Working Papers amz2625, Yale School of Management, revised 01 Jul 2006.
  • Handle: RePEc:ysm:somwrk:amz2625
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    File URL: http://icfpub.som.yale.edu/publications/2625
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    Cited by:

    1. Giampaolo Garzarelli & Lyndal Keeton, 2016. "Policy Experimentation and Intergovernmental Grants in a Federal System," Working Papers 8/16, Sapienza University of Rome, DISS.
    2. Bradley, Michael & Chen, Dong, 2011. "Corporate governance and the cost of debt: Evidence from director limited liability and indemnification provisions," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 83-107, February.
    3. Aguir, Iness & Burns, Natasha & Mansi, Sattar A. & Wald, John K., 2014. "Liability protection, director compensation, and incentives," Journal of Financial Intermediation, Elsevier, vol. 23(4), pages 570-589.
    4. Christoph Engel & Alon Klement & Karen Weinshall Margel, 2017. "Diffusion of Legal Innovations: The Case of Israeli Class Actions," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_11, Max Planck Institute for Research on Collective Goods, revised Jan 2018.
    5. Kothari, S.P. & Ramanna, Karthik & Skinner, Douglas J., 2010. "Implications for GAAP from an analysis of positive research in accounting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 246-286, December.
    6. Daria Roithmayr & Alexander Isakov & David Rand, 2015. "Should Law Keep Pace with Society? Relative Update Rates Determine the Co-Evolution of Institutional Punishment and Citizen Contributions to Public Goods," Games, MDPI, Open Access Journal, vol. 6(2), pages 1-26, June.
    7. Florian Möslein, 2009. "Legal Innovation in European Contract Law: Within and Beyond the (Draft) Common Frame of Reference," EUI-RSCAS Working Papers 7, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).

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