Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-28T16:20:16.637Z Has data issue: false hasContentIssue false
  • English
  • Français

Firms versus corporations: a rebuttal of Simon Deakin, David Gindis, and Geoffrey M. Hodgson

Published online by Cambridge University Press:  15 October 2021

Jean-Philippe Robé
Jean-Philippe Robé*
Affiliation:
Sciences Po, Paris, France
*
Corresponding author. Email: jprobe@orange.fr
Get access Rights & Permissions [Opens in a new window]

Abstract

I share the view expressed by Simon Deakin, David Gindis, and Geoffrey Hodgson (‘DGH’) that social scientists need to consider the constitutive role of law in their disciplines. This is particularly the case for economists working on the theory of the firm and on institutions more generally. Their analyses are often built on assumptions about the legal system which do not correspond to reality. One major issue is the generalized confusion between the concepts of ‘corporation’ and ‘firm’. In day-to-day parlance, the two words are synonyms. But, when the constitutive role of law is considered, the word corporation corresponds to a specific legal device which should be clearly differentiated from a less-specific concept which can be called a ‘firm’ or an ‘enterprise’. The notion of firm usually corresponds to the economic organization of various resources via contracts to produce goods or services. The corporation is a legal institution with peculiar characteristics, including a potentially eternal legal personality, an asset partitioning effect, and several layers of separations of ownership and control. Corporations are often used to legally structure large firms because they are very efficient legal devices to concentrate capital. But, firms are practically and conceptually different from the corporation(s) used to structure them. DGH consider that the understanding of what a firm is should not go against general, day-to-day understanding. In their view, although not all firms are corporations, all corporations are firms. I disagree. Only by clearly explaining that corporations are not firms can lawyers help social scientists consider the constitutive role of the law of corporations in the structuring of our present-day economy.

Keywords

Corporationlaw's constitutive roletheory of the firm
Type
Comment
Information
Journal of Institutional Economics , Volume 18 , Issue 4 , August 2022 , pp. 693 - 701
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arcelin, L. (2003), L'entreprise en droit de la concurrence français et communautaire, Paris: Litec, Bibliothèque de droit de l'entreprise no. 61.Google Scholar
Biondi, Y., Canzani, A. and Kirat, T. (eds.) (2007), The Firm as an Entity – Implications for Economics, Accounting and the Law, Oxon & New York: Routledge.CrossRefGoogle Scholar
Blair, M. M. and Stout, L. A. (1999), ‘A Team Production Theory of Corporate Law’, Virginia Law Review, 85(2): 751–806.CrossRefGoogle Scholar
Deakin, S. (2019), ‘Juridical Ontology and the Theory of the Firm’, in Gagliardi, F. and Gindis, D. (eds), Institutions and Evolution of Capitalism – Essays in Honour of Geoffrey M. Hodgson, Cheltenham, UK and Northampton, MA: Edward Elgar Publishing, pp. 127–141.CrossRefGoogle Scholar
Deakin, S., Gindis, D. and Hodgson, G. M. (2021), ‘What is a Firm? A Reply to Jean-Philippe Robé’, Journal of Institutional Economics, 17(5): 865–875.CrossRefGoogle Scholar
Deakin, S., Gindis, D., Hodgson, G. M., Huang, K. and Pistor, K. (2017), ‘Legal Institutionalism: Capitalism and the Constitutive Role of Law’, Journal of Comparative Economics, 45(1): 188–200.CrossRefGoogle Scholar
Hill, H. P. (1987), Accounting Principles for the Autonomous Corporate Entity, New York: Quorum Books.Google Scholar
Ireland, P. (1999), ‘Company Law and the Myth of Shareholder Ownership’, The Modern Law Review, 62(1): 32–57.CrossRefGoogle Scholar
Jensen, M. C. and Meckling, W. H. (1976), ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’, Journal of Financial Economics, 3(4): 305–360.CrossRefGoogle Scholar
Robé, J.-P. (1995), ‘L'entreprise en droit’, Droit et Société, 29(1): 117–136.CrossRefGoogle Scholar
Robé, J.-P. (1999), L'entreprise et le Droit, Paris: Presses Universitaires de France.Google Scholar
Robé, J.-P. (2011), ‘The Legal Structure of the Firm’, Accounting, Economics, and Law, 1(1): 1–88.Google Scholar
Robé, J.-P. (2012), ‘Being Done with Milton Friedman’, Accounting, Economics, and Law, 2(2): 1–31.Google Scholar
Robé, J.-P. (2015), Le Temps du Monde de l'Entreprise – Globalisation et Mutation du Système Juridique, Paris: Dalloz.Google Scholar
Robé, J.-P. (2019), ‘The Shareholder Value Mess (and How to Clean It Up)’, Accounting, Economics, and Law: A Convivium, 10(3): 1–27.Google Scholar
Robé, J.-P. (2020), Property, Power and Politics – Why We Need to Rethink the World Power System, Bristol: Bristol University Press.Google Scholar
Supiot, A. (1985), ‘Groupes de Sociétés et Paradigme de l'Entreprise’, Revue Trimestrielle de Droit Commercial et de Droit Economique, 38(3): 621.Google Scholar