The notion that good corporate governance means maximizing shareholder value derives from the neoclassical theory of the market economy. I explain why this perspective is highly problematic for understanding the operation and performance of the business corporation and hence the institutions that, for the sake of economic development, should govern it. The main problem is that the market-economy perspective cannot comprehend the process of innovation, including the role of the business corporation. I construct a theory of the innovating firm that, when embedded in comparative-historical analysis, provides a basis for analyzing the relation between corporate governance institutions and economic development.
corporate governance innovative enterprise economic development