In 1990, Harvard Business School professor Michael E. Porter argued that "The Competitive Advantage of Nations"  was the capacity of their industries to innovate and upgrade. Now the bankruptcy code of the United States may be a new competitive advantage for American companies.

In a recent USA Today article , Dennis Cauchon reports on how companies use bankruptcies to shed themselves of pension obligations, union contracts and other onerous burdens. He quotes University of Michigan law professor John Pottow, who declares that, "Chapter 11 in the United States is the darling of the international business world.  If you are a company or even a rich person, you can go into the bankruptcy system and confront your failures, and you will not be punished."

In contrast, English law demands that management be fired when a company declares bankruptcy. Other countries liquidate bankrupt firms or require years of debt payments.

Due to the differences in treatment, many companies utilize the bankruptcy code as a form of business planning.  Every legacy air carrier in the United States has now filed for bankruptcy -- American Airlines ( AMR , quote ) being just the most recent -- using the restructuring to develop a more viable business model.

Having a more lenient bankruptcy code allows companies to be more daring.  That is the spirit of entrepreneurism.   While there is much to be said for a company meeting all its obligations, keeping operations going in bad times rewards everyone involved.  Employees still have a job, customers can remain loyal and creditors can work out compensation arrangements.  A straight liquidation benefits no one if a working agreement can be secured.