Summary of JOIE Article by Ugo Pagano, University of Siena , Italy. The full article is available on the JOIE website.
The modern business corporation is one of the most powerful institutions in contemporary society, yet its origins and nature remain poorly understood. This paper argues that to make sense of what corporations are today — and why they have become so dominant and so controversial — we need to trace their history back to the medieval and chartered corporations from which they emerged as well to consider the characteristics of contemporary intellectual monopoly capitalism.
Medieval Europe was characterized by rigid hierarchies, inherited social roles, and often brutal relations of domination between lords, vassals, and serfs. Yet alongside these hierarchies, a plurality of corporate bodies — churches, guilds, universities, towns — coexisted, competed, and negotiated their jurisdictions in ways that generated unexpected institutional dynamism. It was within this contradictory landscape that the Western tradition of open science was born. Universities, organized as autonomous corporations, established the practice of freely sharing and collectively developing knowledge as a public good — not out of idealism, but as a practical requirement of their institutional independence. This tradition of open science helped lay the foundations for competitive markets and, eventually, for the Industrial Revolution.
The chartered corporations of the early modern period — the East India Company, the Hudson Bay Company, and their counterparts — extended the corporate form into the age of global commerce, combining legal personhood and limited liability with sweeping authority over vast territories. They demonstrated both the extraordinary organizational power of the corporate form and its capacity for violent domination and colonial exploitation — a combination whose echoes can be heard in the hierarchical dependencies of intellectual monopoly capitalism today.
The rise of the centralized nation-state gradually dismantled the Middle-Ages pluralism. Two disciplines — Law and Economics claimed between them to explain everything important about how modern societies work. Lawyers focused on the rules laid down by sovereign states; economists focused on the dynamics of free markets. Both disciplines, despite their differences, shared a common blind spot: they left no room for institutions that were neither pure state law nor pure market economy. The corporation — simultaneously a legal person and a profit-seeking enterprise, simultaneously a private government and a tradable asset — could not be properly understood within either framework. It appeared as an anomaly rather than as one of capitalism’s central organizational achievements.
The modern business corporation reveals itself as a distinctive hybrid with two defining characteristics that set it apart from all previous corporate forms.
The first is its dual institutional function: it simultaneously centralizes market transactions — bringing within a single organization activities that would otherwise be coordinated through arm’s-length exchange — and decentralizes legal ordering, performing quasi-judicial functions that would otherwise require resolution through public courts. It is, in other words, both a substitute for the market and a substitute for the state, combining in a single entity the coordination functions of both.
The second defining characteristic is its person-thing duality. Unlike medieval corporations — which were associations of persons united by a shared mission, whether religious, civic, or scholarly — the modern business corporation is simultaneously a legal person in its own right, capable of owning assets, entering contracts, and bearing liabilities, and a tradable object that can itself be bought, sold, and controlled by shareholders. This duality, absent in medieval corporate forms, creates the distinctive governance challenges of modern capitalism: the corporation is at once the institutional and legal person under which human beings cooperate and produce, and a thing to be deployed in the service of investors’ returns.
For much of the twentieth century, nation-states found ways to manage these challenges. In the United States, antitrust regulation and dispersed ownership constrained the concentration of corporate power. In Europe, strong unions and family ownership provided alternative mechanisms of accountability. Despite their differences, both models shared an important feature: many corporations employed large workforces, generated broadly shared prosperity, and functioned as organizations with genuine cultures and long-term commitments to their employees and communities.
This changed fundamentally from the 1980s onwards with the rise of intellectual monopoly capitalism. A series of legal and institutional changes — most notably the US Bayh-Dole Act of 1980 and the international TRIPs Agreement of 1994 — enabled corporations to claim private ownership over knowledge on an unprecedented scale. Patents, copyrights, and proprietary data became the most valuable assets of leading firms, displacing factories, machinery, and physical infrastructure. The consequences have been profound. A small number of corporations entered a self-reinforcing cycle of knowledge accumulation and financial power, while the majority of firms and workers were left dependent on these knowledge monopolies, locked into low-skill, low-innovation roles without access to the intellectual resources they needed to compete or innovate independently.
The expansion of financial markets has amplified this dynamic rather than checked it. The growth of intangible assets and the growth of finance are not separate phenomena: they are two sides of the same balance sheet. Financial assets — shares, derivatives, investment funds — are ultimately claims on the rents generated by intellectual monopolies. When a handful of giant asset managers such as BlackRock, Vanguard, and State Street hold significant stakes in most major corporations simultaneously, they have little incentive to encourage competition among them. Their interest lies in the stability of monopoly profits across the system as a whole, not in the disruptive innovation that might redistribute those profits.
The result is a form of capitalism that increasingly resembles the feudal hierarchies from which it once emerged. Dominant corporations exercise quasi-governmental authority over dependent firms and workers, structuring the markets in which they operate and shaping the political systems that are supposed to regulate them. The language of techno-feudalism, used by a growing number of scholars, captures something real about this moment. Yet intellectual monopoly capitalism is not simply a return to the Middle Ages. It is also a betrayal of the medieval tradition of open science that made competitive markets and democratic societies possible in the first place. Addressing this challenge requires not just better regulation of individual corporations, but a fundamental rethinking of the relationship between knowledge, power, and democracy — and a renewed commitment to the open science and open markets that remain the best foundations for shared prosperity and international peaceful relations.