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This paper discusses the implications of organizational control on the race for technological leadership in merchant empires. I provide an illustrative framework in which poor organizations have reduced incentives to invest, which in turn stifle technology improvements making leaders lag new entrants. In the late sixteenth century, Portugal's large ships carried more merchandise and were more fitting of the monarch's grandiose preferences, but they also were more prone to disaster. The merchant-controlled Dutch East India Company however, invested in smaller but more seaworthy vessels conducting more voyages at a much lower loss rate. The surviving historical evidence shows Portugal relying on large ships well into the seventeenth century suggesting her technological edge was gone by the time the Dutch dominated the Indian Ocean. [ABSTRACT FROM AUTHOR]

This paper discusses the implications of organizational control on the race for technological leadership in merchant empires. I provide an illustrative framework in which poor organizations have reduced incentives to invest, which in turn stifle technology improvements making leaders lag new entrants. In the late sixteenth century, Portugal's large ships carried more merchandise and were more fitting of the monarch's grandiose preferences, but they also were more prone to disaster. The merchant-controlled Dutch East India Company however, invested in smaller but more seaworthy vessels conducting more voyages at a much lower loss rate. The surviving historical evidence shows Portugal relying on large ships well into the seventeenth century suggesting her technological edge was gone by the time the Dutch dominated the Indian Ocean. [ABSTRACT FROM AUTHOR]

In the sixteenth century, European countries engaged in long-distance trade with the East. Despite sharing the same objectives and technology, Portugal opted for a crown monopoly, England, the Netherlands, and Sweden franchised trade to private merchants, whereas in Denmark and France, king and merchants shared control. The financial condition of the crown appears to have been relevant for the monarchs' decision. I provide an economic mechanism to illuminate the historical variation in terms of the differences in relative endowments of king and merchants within each country. I also explore the implications of control allocation using archival data on labor compensation and shipping technology. Differences in the long run performance of merchant empires suggest a major impact of organization. [ABSTRACT FROM AUTHOR]