Abstract: The Financial Structure of Commercial Revolution: Financing Long-Distance Trade in Venice, 1190-1220, and Venetian Crete, 1303-1400

Dean V. Williamson

Abstract

How did European merchants finance the Commercial Revolution? The principal narrative points up the role of long-distance trade in enabling economic expansion, and it highlights a role for <i>commenda</i> contracts in enabling merchants to share risks and mobilize investment for long-distance trade. While the study points up a role for <i>commenda contracts</i>, it also illuminates trade-offs merchants and their agents encountered in choosing between equity-like schemes (<i>commenda</i>) and debt financing. The study works out of a dataset of 1,633 maritime contracts and demonstrates that it was debt, not <i>commenda</i>, that financed trade on the frontiers of the trade economy. The result fills a gap in the narrative, because debt constituted an important tool in the merchant's contracting toolbox, yet the conventional narrative has little or nothing to say about it. The result delimits the roles of both formal and informal enforcement mechanisms in enabling long-distance trade.