The Law and Governance of Decentralised Business Models
Roger M Barker and Iris H-Y Chiu, The Law and Governance of Decentralised Business Models: Between Hierarchies and Markets, Routledge, 31 Dec 2020
15 Pages Posted: 12 Mar 2021
Date Written: January 25, 2021
This book draws together themes in business model developments in relation to decentralized business models (DBMs) to systematically analyse the challenges to corporate and organizational law, and governance. DBMS include business networks, the global supply chain, public-private partnerships, the platform economy and blockchain-based enterprises. The law of organizational forms and governance has been slow in responding to changes and reliance has been placed on innovations in contract law to support the business model developments. The editors and contributing authors argue that the law of organisations and governance can respond to the phenomenon of decentralised business models driven by transformative technology and new socio-economic dynamics. They argue that principles underlying the law of organisations and governance, such as corporate governance, are crucial to constituting, facilitating and enabling reciprocality, mutuality, governance and redress in relation to these business models, whose creation of wealth neither fully subscribes to a firm or market system, is neither hierarchical or totally decentralized, and incorporates socio-economic elements that are often enmeshed with incentives and relations. This book is likely of interest to academics, policy-makers and legal practitioners, this book offers proposals for new thinking in the law of organization and governance to advance the possibilities of a new socio-economic future.
First the book provides a theoretical framework for arguing that decentralized business models are inadequately recognized as organisations that would benefit from governance norms. Although this does not mean a wholesale transplant of existing organisations law for different types of DBMs, this book intends to stimulate thinking on appropriate hard and soft law norms that would be useful. Our theoretical framework is based on economic sociological insights and we draw from theorists on embedded economic action and the sociological foundations of economic action to support the arguments in the book. Chiu and Brownsword contributed to the theoretical chapters in terms of economic sociology foundations, and the law and policy dilemmas surrounding technological disruptions.
The book discusses a variety of types of DBMs to critically query the missing discourse of ‘organisational perspectives’ and how DBMs can benefit from governance norms, whether in hard or soft law, for internal efficiencies as well as responding to external challenges. The chapter on business networks (Barker) discusses business networks/interfirm alliances and interrogates needs in relation to the fundamental tenets of legal personality and relational governance. The chapter discusses the default modus of governance in DBMs, which is contractual governance, and its inadequacies.
The chapter on global supply chains (Rühmkorf) discusses business needs and their interface with externalities, and whether solutions in organisational reform such as parent company responsibility, enterprise liability, or governance, such as in supply chain management, may be effective. Chiu and Barker then discuss the weaknesses of the predominantly contractual governance of public-private partnerships, which involves private sector finance, risk-taking and operational capabilities to different extents in providing public goods. An innovative proposal for the public purpose corporation is proposed to restructure public-private partnerships for the UK. Chiu and Boeger then discuss the platform economy across two chapters. Online platforms are discussed as straddling ambiguously between being marketplaces and organisational phenomena. The interposition of the platform as a corporate giant can also be distorting for governance and distribution needs. The platform economy can also benefit from thinking regarding alternative organisational purposes, and this shape the organisational and governance tenets in platform economies in different ways. Finally, Chiu and Schneiders continue with the theme of peer-to-peer business models by discussing the new economic phenomena in the space powered by distributed ledger and blockchain technology. This new infrastructure allows decentralised economic activity and innovations to flourish, but these spaces are currently highly contractually-constructed, in particular relying on automated smart contracts. This chapter critically discusses the issues arising in permissionless blockchains which raise significant governance issues, and how permissioned blockchains are developing a middle way to become both marketplaces as well as to sustain shared governance standards and expectations. The chapter critically discusses the need for regulative order. Finally, the editors draw together the insights and arguments in the foregoing chapters and conclude.
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