A Tale of Failing Institutions and Firm Renewal—Cunertorf, Snel, Janssen & Co., 1570–95

Avner Greif postulates that institutions are paramount for the development of firms. They have played a central role in the transition from family- or religiously-led business networks into a business system where individuals, their firms and their networks are central. However, Greif fails to acknowledge that this might not have been a linear process, as institutions often failed to respond to the needs of firms for protection of property rights. Even in highly developed urban economies, such as “the first modern economy” in the sixteenth and seventeenth century Low Countries, institutions were unable to protect firms as postulated by Greif.

I propose to bring forth the case of Cunertorf, Snel & Janssen, a late sixteenth century firm in Lisbon, but constituted by men from the Low Countries. This firm was fairly successful and enjoyed close relationships with merchant elites in Asia, the Atlantic, the Northwest of Europe and the Baltic, reflecting a diversified set of interests in production outlets and consumption markets alike. Despite their notable success, Cunertorf, Snel & Janssen faced serious risk of bankruptcy when a juridical dispute brought before a court in the Low Countries was institutionally mishandled, seriously injuring the social capital of the partners and the economic feasibility of the firm. The analysis of the original trial records and court procedures will demonstrate why the courts in the Low Countries failed to protect the above mentioned firm as well as its partners. Furthermore, these courts were seriously challenged by other avenues of conflict resolution that were more efficient and certainly less damaging for the partners. My hypothesis is that as of the late sixteenth century, political and legal institutions even in the most developed European economy could not guarantee the property rights of firms, the defense of which was paramount for subsequent economic growth.