Growth in per capita income for the developed countries of Japan, the United States and the European Community comes primarily from increased knowledge -- improved skills and innovation in the form of improved products and processes -- not from capital deepening. For innovative ideas to make their contribution, however, new investment is generally required. The most promising new investment project proposals in an economy are likely to be innovation based, because, if they are not, the potential for above normal returns is likely to have already been competed away by other firms making similar investments. Thus, the better an economy is at allocating its scarce savings to implementing the most promising proposed investment projects, the higher the level of innovation. Business law (corporate, securities and contract law) helps shape the institutions that make the decisions that determine which of an economy’s investment project proposals get implemented and which do not. By affecting the ability of an economy to choose the best proposed investment projects, business law can affect the level of innovation and hence the rate of improvement in a country’s economic welfare.
Neither scholars nor policymakers have given this link between law and innovation sufficient attention. Theory is underdeveloped and what exists is under informed by actual experience. Japan, the United States and the European Community each has a rich history of both successes and failures in identifying and implementing highly promising, innovative investment projects. The lessons of the history of each economy, however, are insufficiently understood by its own scholars and even less well understood by scholars from the other two economies. In order to remedy these deficits, the project in business law and innovation will gather the best scholars in the world working at the intersection of law, the economics of contracts and organization, finance and innovation. The papers contributed by these scholars will seek to account for what has happened across three economies with significantly different institutional characteristics. The theory of innovation will be deepened by this better understanding of what works and what does not under various circumstances and why, as well as of the tradeoffs involved. The ultimate goal would be for policymakers in Japan, the United States and the European Community to be able to refine their legal systems in ways that will promote welfare enhancing innovation, based on a better understanding both of what has happened in their own economy and of what has happened in each of the other two.
This project includes a planning session, which has already occurred, a conference in New York at which preliminary drafts of the papers are discussed, and two follow up conferences, respectively in Amsterdam and Tokyo, where final papers will be presented and further input from European and Japanese commentators and participants received. The result will be a coordinated set of papers in a book published by a major university press.
Growth in per capita income for the developed countries of Japan, the United States and the European Community comes primarily from increased knowledge -- improved skills and innovation in the form of improved products and processes -- not from capital deepening. For innovative ideas to make their contribution, however, new investment is generally required. The most promising new investment project proposals in an economy are likely to be innovation based, because, if they are not, the potential for above normal returns is likely to have already been competed away by other firms making similar investments. Thus, the better an economy is at allocating its scarce savings to implementing the most promising proposed investment projects, the higher the level of innovation. Business law (corporate, securities and contract law) helps shape the institutions that make the decisions that determine which of an economy’s investment project proposals get implemented and which do not. By affecting the ability of an economy to choose the best proposed investment projects, business law can affect the level of innovation and hence the rate of improvement in a country’s economic welfare. 
