Good business often squandered/squashed regardless of structure.

Good business often squandered/squashed regardless of structure.

In response to the statement, "The choice of business structure depends on the nature of the product or service, and the nature of the industry sector in which commercialisation is taking place."

There is a great little book worth reading called, "The Company: A Short History of a Revolutionary Idea" (2003) by John Micklethwait and Adrian Woolridge which, while perhaps overly simplistic/sympathetic to the modern world's laissez-faire liberal economic policies, provides evidence that regulatory business oversight has had significant impact in terms of pendulum swings of public demand for reform and/or oversight of business structures through their officially short, brief and often not fully accounted for story.

Middle-class and middle-income nations rely heavily on sole proprietorships, family ownership and limited liability partnerships in the midst of a dwindling regional industrial tax base gutted as surely as derivatives and free currency exchanges have conversely swelled (which hasn’t mattered much in terms of governmental tax collection effectiveness during “laissez faire” derivatives binges) the scale of multinational corporate enterprise. Small businesses make up the backbone of difficult to relocate or offshore structures. These are often described as “Mom and Pop” operations and are often credited for keeping a large proportion of US businesses actually US owned and/or operated as opposed to relocated to free trade zones in Mexico south of the border. Corporate structures as we know them today and limited liability partnerships did not exist even in theory more than about a century ago. At that time service industries were not represented as the ideal economic drivers of entire national economies as they are today.

Similar constraints existed in terms of research funding, development and its relationship (or even relevance) to the public versus corporate or academic fishbowls of the past as in contrast to such a seemingly small business start-up friendly (cozily government-structured political/economic environment) as which supports IP development and patent protection in Australia as described in Howard’s “Domains of Knowledge Transfer” at present. These fish boned diagrammatic representations of knowledge transfer were very fuzzy and up for high debate as little as three to four decades ago (especially sticking in the craws of consulting versus internally employed French engineers of the inter-war period) (Henry in Kipping and Engwall) where the combination of consulting and academic work were little applied or even considered relevant or mutually inclusive with the first case being found in frigid Sweden in the area of auditing just prior to World War Two. (Engwall, Furusten & Wallerstedt in Kipping and Engwall) Even Australia's historical approach to knowledge transfer could be considered infantile and grossly under-endowed when compared to East Asian innovation rate of increase of patent registration since the mid-nineties.

Clearly corporations seek to exist as legal entities to support product development and service delivery but still rely on the due diligence and moral authority of their managing board of directors even if they are dabbling in profit-earning research. There are no liability limitations for failures of managerial due diligence, especially in the phrasing of the question, “What constitutes due diligence?” No global standard is yet applied in such accountancy in a global economy. However I would say (even with reasonable recommendations) regardless of business structure if auditing firms are found to actively engage in moral hazard then the political and power based dynamics influencing business structure as described in Bent Flyberg’s work, “Rationality and Power” may have more impact than the nature or structure of the business itself. Good research and good business are often squandered or squashed by special interests regardless of structure.

Cunningham, L.A. (2006) “Too Big to Fail: Moral Hazard in Auditing and the Need to Restructure the Industry Before it Unravels,” Columbia Law Review, Vol. 106, 2006/Boston College Law School Research Paper No. 108.

Kipping, M. and Engwall, L. (Editors) (2003) Management Consulting: Emergence and Dynamics of a Knowledge Industry, Oxford University Press, Oxford.

Micklethwait, J. and Woolridge, A. (2003) The Company: A Short History of a Revolutionary Idea, Modern Library/Random House, New York.

Flyvbjerg, B. (1998) Rationality and Power, The University of Chicago Press, Chicago.