Prior to the Seventeenth Century the corporation had no permanence. It was more a temporary partnership where all assets were liquidated once a particular endeavour had been completed. They had a planned dissolution date and the capital that backed them was essentially impatient and only extended to that date when the corporation was dissolved.
The first two modern corporations were the Dutch and English East India companies. These were constructed on patient capital, had permanent corporate life, they separated ownership from control and legal liability from ownership. More importantly the corporations were able to build capital over time as a corporation.
Prior to, and even after, very few companies needed this type of organisational structure. Most manufacturing endeavours could be handled through what we would call angle investors today; and until the railway's of the mid-eighteenth century few companies organised as corporations with infinite life.
Kenneth Pomeranz and Steven Topik argue that violence was the reason that the Dutch and English East India companies required this organisational innovation.
Dutch East Indies Ship via Triton86's flickrBecause they needed so much capital to fend each other off, Europe's overseas ventures could not possibly be organized without bringing in many unrelated partners. And because they needed so much fixed capital, only a very large trading volume would generate enough profit to make these ventures worthwhile.As the costs of warfare soared in the mid-18thC the East India companies were no longer viable as economic entities. Interestingly the large companies used violence to enforce monopolies. The Asian traders, rather than take the European's head on, traded around the capital intensive industries where the East India companies could not enforce their monopolies. As a consequence their costs were lower and they could make smaller profits from their trading and remain economically sustainable.
