Edited by Alice de Jonge and Roman Tomasic
Chapter 6: Group companies: supply chain management, theory and regulation
This chapter explores the reasons that drive companies to expand internationally, how companies do so and the ways in which discrete national legal systems strive to keep pace with the international expansions of the companies that they regulate. Companies generally broaden their international reach in order to realize economies of scale in production and distribution or to reduce transaction costs. Companies may also expand to access new markets or supplies or to eliminate competition. While some scholars have advanced theories related to companies’ gradual expansion, others have more recently documented factors that enable some companies to be ‘born global’ and enter multiple international markets at once. Limited liability has made expansion through separately incorporated subsidiaries attractive for companies, and many have developed into vast corporate groups with multiple layers of subsidiaries under the control of holding companies. Because the law traditionally has treated each unit of such a corporate group as an independent company, multinational companies have posed a challenge to regulate, and the companies have manipulated their structures to insulate assets from tort victims and creditors. Consequently, some legal systems have embraced new approaches to the regulation of corporate groups, such as adapting the law in some areas to regard corporate groups as single, unified entities.
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