The States as a Laboratory: Legal Innovation and State Competition for Corporate Charters

Corporate law is an arena in which the metaphor of the "states as a laboratory" describes actual practice, and, for the most part, this is a laboratory that has worked reasonably well. The goal of this Article is to map out over time the diffusion of corporate law reforms across the states. The lawmaking pattern we observe indicates a dynamic process in which legal innovations originate from several sources, creating a period of legal experimentation that tends to identify a statutory formulation that is thereafter adopted by the vast majority of states. Delaware and the Model Act quite often work in tandem. But there are occasions when they advance differing legal rules, accounting for some of the diversity in corporation codes that we observe.