Homogeneity Effects in Corporate Law
Jens Dammann. Entrepreneurs enjoy considerable freedom in choosing the rules that will govern their firms. As a general rule, they are able to select not only the state of incorporation, but also the entity type. When making these choices, entrepreneurs have reason to care about the extent to which other firms are using a particular legal regime. Traditionally, corporate law scholarship on this topic has drawn attention to the relevance of the number of other firms using a given legal regime. Drawing on insights from network theory, Michael Klausner has famously shown that the benefits of a particular legal regime increase as more firms come to use it. This article does not dispute that the number of other users matters, but argues that the qualitative features of a legal regime’s users are relevant as well: in particular, firms benefit if…