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risks.10 They searched for market and institutional mechanisms that would bring hundreds of investors into their conceived enterprises: the VOC and the EIC. But while the Dutch entrepreneurs could benefit in some way from the existence of a market in bonds, the English could not.

Table 2: Political Environment

England

Dutch Republic

Centralized

Federal (Central, Provincial, Municipal)

Landed classes dominate politics

City merchants dominate politics

Weak State support

Substantial State support

Sources: See text

Dutch East India Company

The VOC was formed on top of earlier business entities. The Dutch used various kinds of partnerships in their short-distance maritime trade (Riemersma 1950; Riemersma 1952). At first, the Dutch Asian trade was organized into partnerships that were, in retrospect, called voorcompagnieёn or pre-companies. These were based on two classes of partners, active bewindhebbers and passive participanten. The passive partners were not members of the undertaking and did not participate in decision-making. They invested through active partners who, supposedly, represented them. These pre-companies were a variation on the commenda or limited partnership form.11 The intense competition between these pre-companies raised prices in Asian markets and lowered the prices of Asian goods in Dutch and other European markets and was wasteful in terms of infrastructure. The desire to form a cartel, to save in costs and to coordinate the struggle against the Portuguese and the English, led to the integration of six city-based pre-companies into the United East India Company (the VOC) in 1602 (Steensgaard 1977; Prakash 1985; de Vries and Woude 1997).

The VOC was chartered on March 20 1602 by the States-General, the federal assembly of the Dutch Republic. It was established for 21 years with a trade monopoly for entire area between the Cape of Good Hope and the Straits of Magellan. Its structure reflected the fact that it was a unification of six pre-companies. It had six city-based chambers that were in charge of raising capital and fitting ships. Each Chamber had two classes of shareholders bewindhebbers and participanten. The former had the status of Governors and took active role in management of the Chamber, the later had no voting rights and did not take part in decision making (hereafter they'll be called active share holders and passive shareholders respectively). The united company had a central management, the Heren XVII (hereafter 17 Directors), that was in charge of general policy(Gaastra May 19, 2008 ). Only Chamber Governors were eligible to serve as VOC Directors (Figure 3 sketches the VOC governance structure).  

The VOC had three possible methods for raising initial capital: Social networks, business reputation and government-induced investment. Initial capital for the VOC was raised in August of 1602. Each city-based chamber opened its own register. The active members of the VOC,

10 This depends mainly on whether the new companies offered their shareholders limited liability. Though some scholars claim that the VOC was a limited liability company, others do not find evidence for this. The debate about the legal nature of EIC is not developed. I side with those who do not find support for the limitation of liability of members in either of the corporations.

11 According to one version, they were associations of limited partnerships each of which was composed of an active merchant and his passive investors. According to another version, the pre-company was an association of several active partners and several passive partners.

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