Based on an analysis of the leading trading markets for stock in the United States, I document the dramatic expansion that took place in the scale and scope of the country's stock market from the mid-1880s to the early 1930s. My analysis suggests that a broadbased stock market was a long way from being established even by the early teens. It took the impetus provided by World War I, plus the enthusiasm of the 1920s, to bring such a market into existence. I consider the capacity of today's fashionable theories, which link the development of stock markets to improvements in minority shareholder protection, to explain the growth of the U.S. stock market, and find that they cannot account for the historical patterns that I identify. However, I suggest that there are other arguments that are worthy of further consideration. First, there were factors, besides minority shareholder rights, that led to changes in the demand for corporate stocks during this period, especially an increase in the demand for stocks by institutional investors, notably banks and insurance companies, as well as the emergence of a retail market for stocks after World War I. Second, there were also important developments in the supply of corporate stocks after the War, including the issuance of stock to fund the expansion of young firms, but especially to facilitate mergers and acquisitions by established firms, which seem to have played an important role in driving the expansion of the U.S. stock market.

Paul Rosenstein-Rodan argues that economic development requires coordinated investment in many interdependent industries, and prescribes a flood of state-controlled investment across all sectors—a so-called big push. Widespread government failure defeated twentieth-century ‘big push’ schemes. But spillovers across firms and industries, and from public goods, hold-up problems, and capital market limitations are real, and justify coordinated growth across sectors if it can be done without government failures. Large, extensively diversified pyramidal business groups of listed firms dominate the histories of developed economies and the economies of developing economies. Arguing that such groups provided this coordination in prewar Japan after a state-run big push failed, we propose that pyramidal business groups are private-sector mechanisms for coordinating big push growth, and that competition between rival groups induces efficiency unattainable in a state-run big push. We postulate that a successful business-group led big push requires economic openness, basic public goods, rule of law, separation of the state from business, and a timely demise of business groups when the big push phase is complete.Where these criteria are not met, growth stalls and oligarchic families become too powerful to dislodge.

This article poses three main questions: Does the civil-law tradition favor large, concentrated, universal banking systems? Does this sort of legal system work against the development of active securities markets? Do powerful universal banks (whether or not legal tradition lies at the root of bank power) replace securities markets or prevent them from operating efficiently? Based on evidence from Pre-World War I Germany, this paper argues that the answer to all three questions is “no.”

Around 1900 Britain was exceptionally suited to pioneering large scale enterprises because of the precocious development of its equity markets and London's experimentation with a more eclectic range of corporate governance techniques than the world's smaller and less cosmopolitan financial centers. Information dissemination, incentives, and reputation—developed by a serendipitous mix of legal compulsions and flexible voluntarism—set the scene for the growth of large, UK-based, national and international corporations in the twentieth century.

“The investment business is not with us as well developed or as well understood as it is in England.”

W. H. Lyon, Capitalization (Boston, 1913), 207.

This article challenges the idea that the corporation is a globally superior form of business organization and that the Anglo-American common-law is more conducive to economic development than the code-based legal systems characteristic of continental Europe. Although the corporation had important advantages over the main alternative form of organization (partnerships), it also had disadvantages that limited its appeal to small- and medium-sized enterprises (SMEs). As a result, when businesses were provided with an intermediate choice, the private limited liability company (PLLC) that combined the advantages of legal personhood and joint stock with a flexible internal organizational structure, most chose not to organize as corporations. This article tracks the changes that occurred in the menu of business organizational forms in two common-law countries (the United Kingdom and the United States) and two countries governed by legal codes (France and Germany) and presents data showing the rapidity with which firms in each country responded to enabling legislation for PLLCs. We show that the PLLC was introduced first and most easily in a code country (Germany) and last and with the most difficulty in a commonlaw country (the United States). Late introduction was associated with prolonged use of the partnership form, suggesting that the disadvantages of corporations did indeed weigh heavily on SMEs.