The evolution of company law in Indonesia: An exploration of legal innovation and stagnation

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Abstract

The question of the extent to which "transplant" countries continue to exhibit a particular style and substance of company regulation that mimics that of their respective "origin" countries has become particularly salient since the influential "legal origins" theory was proposed. This Article examines in detail the long historical evolution of company law in Indonesia from the colonial period to the present. Inspired by the approach of Pistor et al. (2002), this research finds some "legal origins" effects in the ways that Indonesian company law has developed, but it also notes that patterns of change have been significantly different from that of its former colonizer, the Netherlands. Indonesia experienced an extended period of time in which no change to its main company law occurred and has displayed evidence of adaptation to local conditions only more recently. This research reveals, however, that many of the contributing explanatory factors for this long period of legal stagnation in Indonesia are found outside Pistor et al.'s analytical framework. They include the ongoing effects of "colonial legal history" rather than "legal family effects," particularly of the race-based plural legal system, competing ideological approaches to business regulation, and the existence of informal business entities. This suggests that a more nuanced understanding of postcolonial and developing economy realities is needed in order to redefine the category of "transplant" countries in comparative studies of company law.

Original languageEnglish
Pages (from-to)377-432
Number of pages56
JournalAmerican Journal of Comparative Law
Volume61
Issue number2
DOIs
Publication statusPublished - 2013

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