The Firm and Common Pool Resource Theory: Understanding the Rise of Benefit Corporations

Forthcoming, in Volume 55.1 of the American Business Law Journal

Kelley School of Business Research Paper No. 18-5

34 Pages Posted: 10 Jan 2018 Last revised: 24 Jan 2018

See all articles by Janine S. Hiller

Janine S. Hiller

Virginia Tech

Scott Shackelford

Indiana University - Kelley School of Business - Department of Business Law; Harvard Kennedy School Belfer Center for Science & International Affairs; Center for Applied Cybersecurity Research; Stanford Center for Internet and Society; Stanford Law School

Date Written: January 5, 2018

Abstract

In September 2015 the crowd-funding site Kickstarter announced that it would adopt a new corporate form, that of a benefit corporation. Kickstarter is far from alone in this decision; in fact, it joined a growing list of tech firms that are moving towards adopting a benefit corporation designation. The result of the legal movement is that corporate governance across the nation is changing, impacting everything from business ethics training to Board decision making, with wide-ranging implications for the economy, environment, and civil society. Despite its growing popularity, though, the rationale behind the emergence of benefit corporations is an understudied question. In this article, we argue that benefit incorporation affects the very nature of the corporation by creating corporate common pool resources, and that the common pool resource theory provides a way to understand the puzzle and future of the movement. This approach is important because it re-situates the conversation, from a narrow view of the effect of the legislation on traditional corporate concepts to a broader view of the impact of the legislation. Furthermore, we consider the benefit corporation through the lens of Professor Elinor Ostrom’s Design Principles, offering a unique perspective through which to analyze if the design of state statutes and implementation by business entities meet criteria that would predict successful governance of the benefit corporation Common Pool Resources.

Keywords: benefit corporation, corporate governance, common pool resource

Suggested Citation

Hiller, Janine S. and Shackelford, Scott J., The Firm and Common Pool Resource Theory: Understanding the Rise of Benefit Corporations (January 5, 2018). Forthcoming, in Volume 55.1 of the American Business Law Journal , Kelley School of Business Research Paper No. 18-5, Available at SSRN: https://ssrn.com/abstract=3097103

Janine S. Hiller (Contact Author)

Virginia Tech ( email )

Pamplin College of Business
Virginia Tech
Blacksburg, VA 24061
United States

Scott J. Shackelford

Indiana University - Kelley School of Business - Department of Business Law ( email )

Bloomington, IN 47405
United States

Harvard Kennedy School Belfer Center for Science & International Affairs ( email )

79 JFK Street
Cambridge, MA 02138
United States

Center for Applied Cybersecurity Research ( email )

Wylie Hall 105
100 South Woodlawn
Bloomington, IN 47405
United States

Stanford Center for Internet and Society ( email )

Palo Alto, CA
United States

Stanford Law School ( email )

Stanford, CA 94305
United States

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