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The Innovative enterprise and corporate governance

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The centrality of corporate enterprises for allocating resources in the economy has sparked the recent debate among economists about the manner in which corporations should be governed to enhance economic performance. This article demonstrates the implications of innovation for corporate governance. To deal with the economics of innovation a theory of corporate governance must come to terms with the developmental, organisational and strategic dimensions of innovative resource allocation. The leading theories of corporate governance - the shareholder and stakeholder theories - do not, however, incorporat a systematic analysis of innovation in their analytical frameworks. I show that both of these perspectives in relying on concepts of resource allocation as individual and optimal contradict what we know about innovation process

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