European Colonization of North America

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What was the significance of joint-stock companies?

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Joint-stock companies were crucial to England’s colonization of the New World. Essentially, a stock was sold to investors who provided capital, creating a joint-stock venture. This form of business proved to be profitable with past trading ventures in Europe, but the crucial differences with New-World enterprises were: high start-up costs;...

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Joint-stock companies were crucial to England’s colonization of the New World. Essentially, a stock was sold to investors who provided capital, creating a joint-stock venture. This form of business proved to be profitable with past trading ventures in Europe, but the crucial differences with New-World enterprises were: high start-up costs; higher risk associated with starting a colony, which might fail (a total of 10 European colonies failed before Jamestown, Virginia was established); and return on investment often took years. Given these circumstances, joint-stock ventures helped mitigate risk by spreading it between multiple investors. Joint-stock companies can be considered the predecessor of the modern corporation.

One of the first joint-stock companies was the Virginia Company, which settled Jamestown. Colonial expeditions were largely financed by merchants. Many were wealthy Puritans who wished to become landowners in the New World. The men leading the expeditions often descended from nobility and were second sons (English law only permitted first-born males from inheriting property). In comparison, the establishment of New Spain and New France were financed and developed by kings.

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