Beyond competition for incorporations

This Article documents and analyzes a powerful form of regulatory competition - competition for investments - that has transformed national corporate laws in the European Union in recent years. Unlike competition for incorporations, competition for investments shapes corporate law when firms cannot easily incorporate outside the jurisdiction in which they operate. These dynamics are not unique to the European Union. They characterized early nineteenth-century state lawmaking in the United States, and may well characterize lawmaking today outside the European Union. High political payoffs await successful participants in the competition for investments, which enables them to overcome opposition that can stifle competition for incorporations. These payoffs, together with the fact that no single jurisdiction can monopolize the market for investments, can drive multiple jurisdictions - including large ones - to compete. Allowing firms to incorporate abroad, as recent European Court of Justice rulings require, may or may not breed competition for incorporations. But so long as the existing competition for investments does not lose steam, the effect on firms will be the same. Judging from the reforms this competition has produced thus far, the effect will continue to be positive.