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Ron Harris

Chapter 4 follows the transformation of the corporate form from an entity chiefly for municipal and public purposes, developed in the medieval period, to one used for business and trade. At the center of his account are the formations at the turn of the seventeenth century of the English East India Company (EIC) and the Dutch East India Company (Verenigde Oostindische Compagnie (VOC)—the first publicly held business corporations and the templates for later adopters of this organizational form. In these two firms the preexisting legal institution of the corporation was put to new use, as the framers of the EIC and VOC borrowed and modified the corporate form, and married it to financial innovations related to joint-stock, to enable successful collaboration between entrepreneurs pursuing oceanic trade with Asia and investors seeking to protect their interests vis-à-vis insiders. The resulting institution met diverse needs, serving as a platform for long-term enterprise, enabling impersonal investment by a large number of investors, mitigating informational asymmetries, and spreading the high risks of oceanic trade.