Law Commons^™

Economically Bebevolent Dictators: Lessobns For Developing Democracies, Ronald J. Gilson, Curtis J. Milhaupt

Ronald J. Gilson

The post-war experience of developing countries leads to two depressing conclusions: only a small number of countries have successfully developed; and development theory has not produced development. In this article we examine one critical fact that might provide insights into the development conundrum: Some autocratic regimes have fundamentally transformed their economies, despite serious deficiencies along a range of other dimensions. Our aim is to understand how growth came about in these regimes, and whether emerging democracies might learn something important from these experiences. Our thesis is that in these economically successful countries, the authoritarian regime managed a critical juncture in …

Braiding: The Interaction Of Formal And Informal Contracting In Theory, Practice And Doctrine, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Ronald J. Gilson

This article studies the relationship between formal contract enforcement, where performance is encouraged by the prospect of judicial intervention, and informal enforcement, where performance is motivated by the threat of lost reputation and expected future dealings or a taste for reciprocity. The incomplete contracting literature treats the two strategies as separate phenomena. By contrast, a rich experimental literature considers whether the introduction of formal contracting and state enforcement “crowds out” or degrades the operation of informal contracting. Both literatures, however, focus too narrowly on formal contracts as a system of incentives for inducing parties to perform substantive actions, while assuming …

Braiding: The Interaction Of Formal And Informal Contracting In Theory, Practice And Doctrine, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Ronald J. Gilson

This article studies the relationship between formal contract enforcement, where performance is encouraged by the prospect of judicial intervention, and informal enforcement, where performance is motivated by the threat of lost reputation and expected future dealings or a taste for reciprocity. The incomplete contracting literature treats the two strategies as separate phenomena. By contrast, a rich experimental literature considers whether the introduction of formal contracting and state enforcement “crowds out” or degrades the operation of informal contracting. Both literatures, however, focus too narrowly on formal contracts as a system of incentives for inducing parties to perform substantive actions, while assuming …

Economically Benevolent Dictators: Lessons For Developing Democracies, Ronald J. Gilson

Ronald J. Gilson

Gilson & Milhaupt, Economically Benevolent Dictators: Lessons for Developing Democracies

Abstract.

The post-war experience of developing countries leads to two depressing conclusions: only a small number of countries have successfully developed; and development theory has not produced development. In this article we examine one critical fact that might provide insights into the development conundrum: Some autocratic regimes have fundamentally transformed their economies, despite serious deficiencies along a range of other dimensions. Our aim is to understand how growth came about in these regimes, and whether emerging democracies might learn something important from these experiences.

Our thesis is that in these …

Locating Innovation: The Endogeniety Of Technology, Organizational Structure And Financial Contracting, Ronald J. Gilson

Ronald J. Gilson

There is much we do not understand about the “location” of innovation; the confluence, for a particular innovation, of the technology associated with the innovation, the innovating firm’s size and organizational structure, and the financial contracting that supports the innovation. This article develops the theme that these three determinants of the location of innovation are simultaneously determined through examination of examples of innovative activity whose location is characterized by tradeoffs between pursuing the activity in a an established company or in a smaller, earlier stage company, or some combination of the two. It first considers the dilemma faced by an …

Controlling Family Shareholders In Developing Countries: Anchoring Relational Exchange, Ronald J. Gilson

Ronald J. Gilson

The Law and Finance account of the ubiquity of controlling shareholders in developing markets is based on conditions in the capital market: poor shareholder protection law prevents controlling shareholders from parting with control out of fear of exploitation by a new controlling shareholder who acquires a controlling position in the market. This explanation, however, does not address why we observe any minority shareholders in such markets, or why controlling shareholders in developing markets are most often family-based. This paper looks at the impact of “bad law” on shareholder distribution in a very different way. Developing countries typically provide not only …