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Paul D. Reynolds
Edited by Dirk Lindebaum, Deanna Geddes and Peter J. Jordan
This chapter introduces the concept of governance as a key term when examining the current economic situation, including growing economic inequality. In order to understand such an economic and social phenomenon, analytical terms that bridge public companies, state-controlled agencies, and transnational regulators need to be introduced. The chapter introduces and critically discusses key terms in the governance literature, including corporate governance, transnational governance, and related terms such as accountability.
Paul D. Reynolds
On October 28, 2003 Harvard students could use “Facemash” to compare which photos of two undergraduates were “hot” or “not hot.” Developed as personal project by Mark Zuckerberg it was followed by several other efforts that led to the implementation of “Thefacebook” on February 4, 2004; this provided students a mechanism for internet based social interaction. A five person start-up team embellished the potential for interaction and expanded access to other universities, high schools and eventually anybody over 13 years old. When the first public offering was initiated in 2012, “Facebook” reported annual revenue of $5 billion, yearly profits of $53 million, one billion users, and 4,619 employees.1 Convinced that a properly designed website could provide an efficient and economical interface between citizens and government agencies, high school buddies Kaleil Tuzman and Tom Herman used seed money from Herman’s mother to implement “Govworks.com” to process parking tickets in May 1999. A four person start-up team led the website development and within 18 months “Govworks.com” raised $70 million to support 250 employees. Out maneuvered by competitors such as “ezgov. com,” unable to manage the complex technical issues, and confronted with a dramatic decline in stock market valuations of internet based initial public offerings, by January 2001 the remnants of the firm were sold for $12 million.
Geoffrey Wood and Mehmet Demirbag
This book seeks to shed further light on the type of capitalism that has emerged in Central Asia, the Caucasus and other peripheral areas of the post-state socialist world, drawing out the implications for both domestic and overseas firms from a broad perspective that is founded in the literature on comparative institutional analysis. We call this cluster of countries the ‘transitional periphery economies’, to set them apart from other emerging and more mature types of capitalism; this reflects the more complex mix of political and market mediation, and informal personal ties, than is encountered in the more developed states of the post-state socialist world. This collection is a wide-ranging one, and incorporates both detailed country studies and chapters dealing with broad thematic issues. What these accounts have in common is that liberalization is not a one-way street, and that there is little connection between liberalization and growth. At the same time, international firms are pragmatic and creative in finding ways of coping with quite different yet durable forms of institutional mediation and coverage. COMPARATIVE CAPITALISM AND THE TRANSITIONAL PERIPHERY Although the early literature on comparative capitalism focused on the case of the developed world, there has been a growing interest in the types of institutional arrangements prevalent in key emerging markets (Lane and Wood, 2012; Wood and Demirbag, 2012; Demirbag and Yaprak, 2015). The early literature on comparative capitalism held that only in the developed world were there the institutional foundations for stable and sustained growth and high levels of overall prosperity, and in other economies there would be strong pressures to converge with either the liberal or coordinated market ideal (Hall and Soskice, 2003). However, since the early 2000s, it has become clear that many emerging markets have proved capable of generating significant growth despite a failure to evolve towards one or other of the mature institutional archetypes, and others have become locked on suboptimal trajectories, with little prospect of meaningful institutional redesign (Lane and Wood, 2012). This has led to efforts to identify new capitalist archetypes that might best describe such persistently different economies. Again, much of the early comparative literature on institutions has tended to focus on the firm as a transmission belt, whereby specific sets of institutional pressures resulted in some outcome or other; what went on inside the firm was, at best, described in terms of stylistic ideal-types (Wood et al., 2014). This, in turn, has led to a subsequent interest in exploring variations in intra-organizational practice, and the effects of the entrants of new players from abroad.
Chapter 1 introduces governance as a legal issue, ultimately grounded in the philosophy of right, a branch of philosophy. Early legal theorists such as Hugo Grotius sketched versions of what is today called governance, and there is today a line of demarcation drawn between liberal economies of the Anglo-American type, and continental and Scandinavian embedded economies wherein the state is recognized as a major agent influencing the economic system. The chapter discusses the differences between John Locke’s liberal view of, e.g., ownership rights, and George Wilhelm Friedrich Hegel’s philosophy of right, developed 14 decades later. Whereas Locke emphasizes a “minimal theory” of ownership rights, serving as the foundation for liberalism, Hegel too recognizes ownership as a fundamental right but locates ownership rights within the realm of the state. Consequently, the intellectual roots of liberal economies and embedded economies share certain assumptions but also diverge regarding assumptions about the role of the state. The second half of the chapter examines the creation of the Berle–Means firm, a key legal vehicle in the liberal economy and in its governance.