The Limited Partnership in New York, 1822-1853: Partnerships without Kinship
In 1822, New York became the first common-law state to authorize the formation of limited partnerships, and over the ensuing decades, many other states followed. Most prior research has suggested that these statutes were utilized only rarely, but little is known about their effects. Using newly collected data, this paper analyzes the use of the limited partnership in nineteenth-century New York City. We find that the limited partnership form was adopted by a surprising number of firms, and that limited partnerships had more capital, failed at lower rates, and were less likely to be formed on the basis of kinship ties, compared to ordinary partnerships. The latter differences were not simply due to selection: even though the merchants who invested in limited partnerships were a wealthy and successful elite, their own ordinary partnerships were quite different from their limited partnerships. The results suggest that the limited partnership facilitated investments outside kinship networks, and into the hands of talented young merchants.
We are grateful to Amalia Kessler, Naomi Lamoreaux, Aldo Musacchio, Peter Temin, Akila Weerapana and seminar participants at the NBER Summer Institute for helpful comments and suggestions. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Hilt, Eric & O'Banion, Katharine, 2009. "The Limited Partnership in New York, 1822?1858: Partnerships Without Kinship," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 615-645, September.