Robert,

Douglas North, who taught economics at Washington U in St. Louis where I
went to law school, won the Nobel prize in economics many years ago for work
in this area. He talks explicitly about the importance of legal
institutions. You could site the abundant literature in this field to
support your claim that there is a growing amount of work arguing that legal
institutions are critical for economic development.

Here's a syllabus, a few years old, that can plug you into the economics
work on the area:

http://www.coase.org/niereadinglistnorthnye2003.htm

The work of Peruvian economist Hernando de Soto may be of particular
interest. He argues, in a series of very accessible books, that the lack of
security and transferability of property rights explains slums. He also
details how comically difficult and time-consuming it is to legally register
a business in many poor countries.

There is, however, a countervailing thread of research arguing that China is
a problem for the NIE thesis because it has had great, sustained economic
growth, yet nobody argues it has great legal institutions. You could look at
some stuff by Donald Clarke for a sample of this.

As you know there is some great work (from ALSB members!) arguing firms can
increase their competitive advantage (vis a vis other firms) using legal
tactics, but probably that stuff is conceptually separate from the work
arguing legal institutions are critical to the success of firms in an
aggregate, national (or global) sense. The former buttresses the legitimacy
of our discipline as a management tool; the latter, as you and others have
pointed out, offers a more fundamental theoretical foundation for the role
of law in business.

To editorialize for a moment, my impression is that our field tends to
woefully under-theorize our work and leave what we teach woefully
disconnected from practical business concerns.

To the extent law matters in most business schools (and it varies from
substantially to almost not at all), the key justification tends to be
because the CPA exam retains some legal content. Without that, would the
legal curriculum in business schools not be even more marginalized than it
is? Would our courses even exist?
 
We can and should argue understanding law helps you stay out of jail, can
help you make money (or avoid losing it), and is basic civic literacy, but
adding a grander claim that law is a sine qua non for business strengthens
the argument that we should have a place, probably a bigger place, in
business school curricula.

I think our training in law schools, where we learn to splice doctrines and
closely read cases more than think about grand questions, socializes us so
that we're comfortable teaching black letter doctrine and the art of case
reading. I imagine as a group we're less comfortable connecting a chapter on
some doctrinal area to any theoretical underpinnings or practical business
practices. To wit, most of us know the meaning of the "mailbox rule" and
teach it, but I suspect radically fewer of us are familiar with NIE ideas
and introduce them, nor do most of us have enough experience in practice to
show how the reps and warranties in a stock purchase agreement are a
practical tool for allocating risk, how real life business contracts (rather
than doctrines about peppercorns as consideration) constitute legal
engineering for M&A transactions, just as vital to dealmaking as the
spreadsheet and valuation parts of the deal. That's to our detriment, I
think.


Cheers,
Walter Hutchens

On 2007/02/3 3:09 AM, "Robert Bird" <[log in to unmask]> wrote:

> Yes, I believe that's what my colleagues were referring to.  Now I need to
> find some example of a trend that shows an increasing interest in the
> influence of legal institutions on firms.  In other words, that institutional
> economics has reinvigorated the idea of something we business law people knew
> all along -- that law deeply influences the practice of business and can
> impact a firm's competitive advantage.
>  
> Robert
>  
> Robert C. Bird
> Assistant Professor
> University of Connecticut
> email: [log in to unmask] <mailto:[log in to unmask]>
> View my research on my SSRN Author page:
> http://ssrn.com/author=56987 <http://ssrn.com/author=56987>
> 
> ________________________________
> 
> From: Academy of Legal Studies in Business (ALSB) Talk on behalf of Lee Reed
> Sent: Fri 2/2/2007 12:06 PM
> To: [log in to unmask]
> Subject: Re: popularity of researching "institutions"
> 
> 
> 
> Note that I think in the sense Robert is referring to "institution," it refers
> to any organizing practice or behavior of importance in the life of a
> community. A growing study of such things is contemporary "institutional
> economics." Christopher Clague and Stephen Knack are both big names in this
> field. Both of these scholars heavily focus on the role of law as an
> institution (especially property and contract)and its necessary impact in
> creating the wealth of nations. For instance, the modern private market as we
> understand it is founded on property and contract law (the latter being how
> owners exchange resources in a property-based  system). Without such
> institutional support, the modern market hardly functions meaningfully.
> Property and contract as institutional underpinnings to the private market
> should be asserted as fundamental to why we teach in the business school, on a
> standing equal to the understanding of economics.