Does Economic Governance Matter?

Does Economic Governance Matter?

Governance Institutions and Outcomes

New Directions in Modern Economics series

Edited by Mehmet Ugur and David Sunderland

This book contributes to the growing governance literature in three ways. First, it extends the analysis to new areas such as power asymmetry, regulation, transnational company strategies, and law enforcement. Secondly, it examines the role of formal institutions that shape and enforce the rules/norms codified in law; but also private-ordering institutions that function under the umbrella of the State; and private institutions (such as market rules/norms) that provide reputational and other information that foster compliance. Finally, the book extends and enriches the governance debate, addressing issues such as the determinants of institutional quality and efficiency, and the interaction between actor networks and institutional norms.

Chapter 3: Norms, Advice Networks and Joint Economic Governance: The Case of Conflicts Among Shareholders at the Commercial Court of Paris

Emmanuel Lazega, Lise Mounier and Paola Tubaro

Subjects: business and management, corporate governance, economics and finance, corporate governance, institutional economics, political economy, politics and public policy, political economy

Extract

Emmanuel Lazega, Lise Mounier and Paola Tubaro INTRODUCTION Businesses are usually very keen to participate in the governance of their markets (Lazega and Mounier, 2002, 2003; Falconi et al., 2005). In this chapter, we combine a sociological perspective on joint governance of markets with an economic perspective, such as that of Dixit (2009), that deals with issues of social optimality of private or public governance and enforcement institutions. Institutional and neo-institutional economic theory often separate official governance institutions from private self-governance (Greif, 1996; Ellickson, 1991; Milgrom et al., 1990; Williamson, 1985). At the inter-organizational level, at least two different sociological traditions also deal with the issue of self- and exogenous governance of markets, comparing the formal and often exogenous aspects with informal and endogenous ones. In the socio-legal approach, exogenous governance (see for example Ayres and Braithwaite, 1992; Hawkins, 1984; Hawkins and Thomas, 1984; Shapiro, 1984; Weait, 1993; Weaver, 1977) is provided by government agencies backed up by courts. These studies focus, for example, on the decision by government agencies to prosecute deviant companies. Such decisions are not straightforward and may often be endogenous outcomes of the interaction between official inspectors and company managers. This is especially the case when strict enforcement of the law is associated with large risks emanating from large-scale losses and layoffs, and sometimes bankruptcy. The second tradition focuses on self-governance mechanisms usually legitimated by state backing – that is, on inter-firm arrangements that 46 M2691 - UGUR PRINT.indd 46 22/07/2011 11:39 Norms, advice networks and...

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