Abstract: This chapter studies the internal organization of the investment bank. Historically, investment banks were partnership firms. Their recent conversion to joint stock corporations is explained. It is argued that partnership firms are valuable in businesses that rely upon human capital, because agents within partnerships can be incentivised to share their tacit skills in a way that would be impossible within joint stock firms. The computerization studied in Chapter 8 resulted in the codification of many formerly tacit skills. At the same time, investment banks needed more financial, as opposed to human, capital than ever before. These trends lowered the relevance and the viability of investment banking partnerships, and led to their flotation. Several subsequent developments were intended to substitute for key partnership firm attributes. The emergence of the covenant not to compete, and of financial patents is studied in this context.

Keywords: partnership, human capital, tacit skill, codification, flotation, covenant not to compete, financial patents,