Brayden King at OrgTheory notes how successful anti-Walmart protest groups have been (at least on those occasions when they protest). To borrow from Albert O. Hirschmann’s “Exit, Voice and Loyalty”, Wal-Mart may in part be using Voice as a signal for the potential of Exit. You might view this as evidence that politics isn’t so rigged by corporations, and in that case you’ve probably never heard of Saint Consulting Group.
On an unrelated note, a former guest contributor to OrgTheory once noted that “Germany has far fewer public corporations (656) than Hong Kong (1165) or Malaysia (1027)”.
Entitled to an Opinion 
November 30, 2010 at 11:40 pm
Maybe it has something to do with the businessman’s daughter?
December 1, 2010 at 12:15 am
That whooshing sound is Steve’s point going over my head.
December 1, 2010 at 11:42 am
The smaller number of publicly traded corporations in Germany than in Hong Kong or Malaysia has undoubtedly to do with the relative friendliness of corporate law in their respective jurisdictions.
You might as well ask why so many publicly traded corporations are chartered in Delaware, when it is such a small state. The same explanation applies there.
An entire subdivision of economics, called “industrial organization,” exists for the study of such questions. Where basic market conditions such as consumer demand, proximity of raw materials, or the ready availability of qualified workers do not easily explain a business’s choice of location, government policy (e.g., regulation, taxation and/or subsidy, barriers to entry, investment incentives, etc.) is most often the deciding factor.
December 1, 2010 at 3:56 pm
The comparison of Germany, Hong Kong, and Malaysia can be explained by their corporate law, although I’m less certain about the value of industrial organization economics for these three. Germany has lots of companies and is a highly successful exporter (like Hong Kong and Malaysia); its requirements for labor representation on corporate boards and idiosyncratic shareholder protections limit the appeal of going public, so it has a vast mittelstand that in other countries might be public corporations. Perhaps a more interesting comparison is Pakistan–which also has more public corporations (629 as of 2009) than Germany!
Delaware requires a different explanation, because very few of the corporations incorporated there are actually headquartered there. (Thank you, commerce clause.) Delaware is the McDonald’s of corporate law, attracting both domestic customers and Russian money-launderers by its quick-serve corporate law, and thereby sparing its citizenry from taxes (albeit at the expense of other states’ fiscs). I doubt that Malaysia attracts non-domestic corporations, no matter how good its corporate law.
And then there is Romania, which in 2000 had over 5500 public corporations–behind only the US and India. Wha?
December 2, 2010 at 3:46 pm
I do not see why “Delaware requires a different explanation.” In both its case and the others mentioned, the explanation is the relative ease or onerousness of corporate regulation. There may be different specifics in the cases of Hong Kong and Malaysia, but the general explanation is the same.
There was a considerable competition amongst American states for corporate charters in the late nineteenth century, coincident with the development of manufacturing on an individual scale. New Jersey initially led the way with the passage of the New Jersey Holding Company Act of 1889. Frederick Lewis Allen, in his biography “The Great Pierpont Morgan” (1949) devotes three pages to this law, and its author, James B. Dill. He writes:
“The idea began to get round that there was nothing so remunerative as promoting New Jersey holding companies. You could become a promoter without even learning much about the businesses you were combining; did not the Moore brothers, within the space of a few years, organize a combination of match companies, a combination of biscuit companies, and a combination of tin-plate companies, and profit preposterously thereby? What Dill had invented might well have been described as a device for the manufacture of millionaires.
“Yet it was also a device for expanding and co-ordination the industries of America to met the conditions of a new day. A mature and united country offered a filed for business operations on a national scale. And Dill’s invention made such operations abundantly possible.” [p. 161, ad fin.]
December 2, 2010 at 3:48 pm
n.b. – the first sentence of the second para. should read: “…coincident with the development of manufacturing on an industrial scale.”
December 1, 2010 at 9:35 pm
Funny that Jerry is introducing more examples of countries with more corporations than Germany. His original point was that the U.S model is passe, but now it is Germany that sounds weirder. Sort of like how Europe is weird on the death penalty.
“albeit at the expense of other states’ fiscs”
A while back I played Devil’s Advocate against Scott Sumner for the idea that neoliberalism is a beggar-thy-neighbor strategy. I don’t really believe it, but I should have used Delaware as an example.
December 2, 2010 at 7:01 am
My point on this thread was not about the US model being passe, but was originally about the importance of Wal-Mart. Then there was this unrelated note about Malaysia vs. Germany, followed by a response about industrial organization (neither of which were obviously about the US or its model)…
In any case, the contemporary dynamics of inter-state competition get an example-filled discussion in chapter 5 of “Managed by the markets,” titled “From sovereign to vendor-state: how Delaware and Liberia became the McDonald’s and Nike of corporate law.” State competition for Google server-farms or for stadiums may be mostly zero-sum, but is a pretty old story; competition among corporate jurisdictions is something weirder. (Why is Royal Caribbean Cruises of Miami incorporate in Liberia? Why are the elderly creating shell corporations in Montana?)
December 3, 2010 at 9:53 pm
Jerry, there are two different threads. “Studying the world’s largest corporation” and “Another world is possible”.
Michael, I don’t know much about Delaware but perhaps Jerry was suggesting that (unlike Hong Kong & Malaysia) many of the businesses nominally chartered there don’t actually do much of their business there?
December 4, 2010 at 12:00 am
Yes, of course that’s what he’s suggesting. And as I noted, this is a difference in specifics. The general explanation – less onerous corporate regulation and taxation – applies equally to Malaysia or Hong Kong on one hand and to Delaware or Liberia on the other. And the study of such examples is in all cases the proper subject of the economics of industrial organization.
December 5, 2010 at 3:01 am
“We protect clients from unwanted competition”
Isn’t there a law against that?