A new understanding of the history of limited liability: An invitation for theoretical reframing

Ron Harris*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


I investigate the historical development of limited liability - widely considered a cornerstone of the business corporation - and challenge the commonplace linear narratives about how limited liability evolved. I dismiss the claim that limited liability was invented with the very first joint-stock business corporations around 1600. I also reject the assertion that it became dominant with the limited liability acts of the mid-19th century. My argument is that it was only around 1800 that limited liability became a separate corporate attribute, distinct from legal personality, and that limited liability in the modern sense became a uniform attribute of all corporations only in the 20th century. Since corporations, stock markets and the corporate economy enjoyed a long and prosperous history well before limited liability in its modern sense became established and dominant, the economic theory of limited liability needs to be revisited. The paper opens a new set of conceptual, empirical and theoretical research questions, and points to new possibilities in terms of viable future liability regimes.

Original languageEnglish
Pages (from-to)643-664
Number of pages22
JournalJournal of Institutional Economics
Issue number5
StatePublished - 1 Oct 2020


  • Corporate law
  • corporations
  • entity shielding
  • institutional economics
  • joint-stock companies
  • limited liability
  • owner shielding


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