Toward a theory of induced institutional innovation

In this paper we elaborate a theory of institutional innovation in which changes in the demand for institutional innovation are induced by changes in relative resource endowments and by technical change. We illustrate, from agricultural history, how changes in resource endowments and technical change have induced changes in private property rights and in the development of non‐market institutions. We also consider the impact of advances in social science knowledge and of cultural endowments on the supply of institutional change. In a final section we present the elements of a model of institutional innovation that maps the relationships among resource endowments, cultural endowments, technology, and institutions.     

Transition to a market economy and sustained growth. Implications for the post-Washington consensus

Transition to a market economy is a lengthy process comprised of various spheres of economic activities. The belief that a market economy can be introduced by “shock therapy” is wrong, and in several cases has caused more problems than it has solved. Since a market economy requires adequate institutional structures, transition can be executed only in a gradual manner. Despite the fact that so-called Washington consensus, i.e. a set of policies aiming to shift from stabilization to growth, was developed without concern for post-socialist transformation, these ideas have significantly influenced the path of thought and action in Eastern Europe and the former Soviet Union. After a decade of transition and lasting depression, a new, post-Washington consensus is developing. Major policy conclusions suggest that the core of emerging consensus, also based on the lessons from transitions, is institutional building. Only with strong institutions can liberalization and privatization put emerging post-socialist markets on the path of sustainable growth. Yet, to accomplish such a task the policy reforms must also take into consideration the need for equitable growth and the new role of the state. The latter must not retire from economic activities, but ought to change its role to support the reforms and integration of the post-socialist countries into the world economy in the era of globalization, of which the post-communist transition is an important part.     

Local governance and learning: in search of a conceptual framework

This article proposes a conceptual framework explaining the phenomenon of local governance learning. The framework is grounded in organisational learning, institutional theory and in a case study of local governance practices undertaken in the process of public dispute resolution. Our analysis offers an advancement in the knowledge on governance learning by (1) specifying different types of governance learning, which are linked to the structure of learning not to its motivation, (2) linking the micro level of local governance practices with the mezzo level of organisational structures, and with the institutions regulating governance on the macro level and (3) explicating the difference between learning and institutional change. We introduce the category of astonishment, which we treat as a prerequisite of governance learning. It is defined as a cognitive state caused by a disruption of institutionalised patterns of thinking and behaviour deployed by a (public) organisation to deal with a specific (social) problem.     

MEETING THE CHALLENGE OF TECHNOLOGY‐DRIVEN CHANGE WITHIN AN INSTITUTIONAL CONTEXT: THE GREEK CASE

Propelled by the driving forces of globalization and technology explosion, public institutions face the challenge of rapid and discontinuous change. Such change has come to undermine the relevance of traditional approaches on how an institution should be managed. We analyse a technology‐driven change effort, the implementation of an Integrated Information System (IIS), that unfolds within the boundaries of the institutional context of the Hellenic Parliament. The purpose of our research, which reports on a qualitative field study, is to explore and understand how the particularities of technology‐driven change on the one hand, and institutional change on the other, can be integrated, paying particular attention to how the different actors involved in the process interact and affect the unfolding of such a change effort. Our findings show that strong friction did indeed occur between old and new institutional factors, but that the key factor enabling the change effort to advance and finally gain legitimation was the encouragement and support in the institutional change process of opportunity‐based and emerging changes, as proposed by the technological change literature.     

THE EUROPEANIZATION OF HEALTH CARE GOVERNANCE: IMPLEMENTING THE MARKET IMPERATIVES OF EUROPE

The paper examines the Europeanization process and the impact of the European Union (EU) on national healthcare policies, using the example of Denmark. The analysis reveals that although health policy formally falls within the competence of member states, the impact of the EU is becoming increasingly conspicuous and has contributed to a gradual restructuring of healthcare boundaries as well as of some of its organizing principles. Furthermore, the process and impact have a de‐structuring effect on the more traditional governance tools used in relation to healthcare. The paper concludes that the EU has a significant impact and that we may be witnessing the formation of a new institutional legacy that represents the initiation of a Europeanized healthcare model: a model emerging around a new set of stakeholders, principles and structures, which includes the market, principles of free movement, patient choice and patient rights institutionalized and safeguarded by the EU.     

Limits of regulatory governance change in the post-developmental state: Korean telecommunications market restructurings from a comparative perspective

This study explains the limits of institutional transformation in Korea from the developmental state to a post-developmental state, in terms of regulatory institutions instead of developmental institutions. The Korean state has taken advantage of the government's discretionary policy changes and power formed by both informal state institutions and informal policy networks, while the regulatory state has placed a special emphasis on social consensus as well as political support for changes of market institutions. New market rules and laws have also been inefficient and ineffective for fair market competition. Limits of regulatory governance change have occurred due to misalignments between informal regulatory institutions in the developmental state and formal regulatory institutions in the post-developmental state. State managers have created discretionary state intervention in policy implementation, politicized the roles of regulatory agencies, and brought ministry-type regulatory state institutions back in. The establishment of effective market institutions has failed due to informal market institutions (unfair and illegal market practices) that have interfered with the policy implementation of new formal market regulations.     

Implementing Privatization Policies in 'Next Steps' Agencies

This article examines the implementation of privatization policies in two 'Next Steps' agencies. This is discussed with reference to the broader theoretical and empirical questions of how do institutions change and when are political actors constrained in implementing their policy choices. Cortell and Peterson's framework for explaining institutional change, and the concept of intra-state policy networks are used to analyse the cases. The differential outcomes identified illustrate how constraints operate and how these may be overcome by strategic actors to produce change. Constraints in these cases arose from fragmentation and dependence in central government, from differing institutionalized beliefs and from the development of intra-state networks between the departments and agencies. The paper concludes by suggesting that the type of intra-state networks created through agencification can be seen to have an effect on policy outcomes and are worthy of more detailed research.     

Implementing Privatization Policies in ‘Next Steps’ Agencies

This article examines the implementation of privatization policies in two ‘Next Steps’ agencies. This is discussed with reference to the broader theoretical and empirical questions of how do institutions change and when are political actors constrained in implementing their policy choices. Cortell and Peterson’s framework for explaining institutional change, and the concept of intra-state policy networks are used to analyse the cases. The differential outcomes identified illustrate how constraints operate and how these may be overcome by strategic actors to produce change. Constraints in these cases arose from fragmentation and dependence in central government, from differing institutionalized beliefs and from the development of intra-state networks between the departments and agencies. The paper concludes by suggesting that the type of intra-state networks created through agencification can be seen to have an effect on policy outcomes and are worthy of more detailed research.     

Family Ties and Socio-Economic Outcomes in High vs Low Income Countries

Alesina and Giuliano illustrate that strong family ties lead to lower geographical mobility and reduced labour force participation of young and female individuals. We extend their analysis by arguing that the effect of strong family ties on economic outcomes depends on a country’s level of economic and institutional development. This cross-country heterogeneity arises because strong family ties not only foster traditional family values (which have disruptive effects on economic outcomes), but also provide economically valuable social networks – especially in societies characterised by weak institutions and limited market access. Empirical evidence using the European and World Value Surveys (EVS/WVS) are supportive of our theoretical argument.     

Social Capital and Institutional Trust: Evidence from Bolivia's Popular Participation Decentralisation Reforms

This article uses Bolivia's emblematic process of decentralisation (Popular Participation) to explore the elusive relationship between interpersonal and institutional trust, as central components of social capital. The evidence corroborates the notion that basic social interaction and more complex institutional settings are strongly co-related, such as the trust that individuals place in their governments and institutions. The data also shows that social capital has a direct effect on civic activism and political behaviour at the individual level. The notion of social capital is present throughout the analysis as this type of capital allows observing and measuring changes in social structures that affect more complex institutional arrangements.     

The G20, the Crisis,and the Rise of Global Developmental Liberalism

The emergence of the G20 leaders' meeting during the recent global financial crisis as the ‘premier forum for international economic cooperation’ reflects a significant shift of hegemony over global governance towards the emerging economies but does not challenge the authority or objectives of the international financial institutions. On the contrary, successive G20 initiatives, culminating in the adoption of the Seoul Development Consensus for Shared Growth in November 2010, reveal both a further strengthening of the already close institutional relationship between the G20 and the Bretton Woods institutions and a strong shared commitment to a developmental form of global liberalism. This article charts the ascendancy of emerging economy perspectives through the lens of the G20, maps their ties to the imf and other international organisations, sets out the content of the new global developmental liberalism, and assesses the implications of emerging economy hegemony for the advanced and the emerging economies, respectively.     

IDENTIFYING CAUSALITY IN PUBLIC INSTITUTIONAL CHANGE: THE ADAPTATION OF THE NATIONAL ASSEMBLY FOR WALES TO THE EUROPEAN UNION

The aim of this article is to identify causes and effects of public institutional change. Analysis is centred on those endogenous, not exogenous, sources of political change that account for the institutional metamorphosis of the Welsh Assembly in its engagement with UK‐EU processes since 1999. The central research question addressed is to explain a qualitative shift in the logic of action of Assembly engagement, resulting in the conduct of a territorially sensitive ‘parliamentary’ EU scrutiny, but within a model of executive devolution. To capture agency and change, and to engage with sociological institutionalist debates, the article develops analytical tools of ‘framing’ and ‘operationalizing’ institutions to study the interplay between informal and formal processes of institution building since devolution. In so doing, we place refined sociological conceptions of institutions at the heart of analyses of political discontinuity and theorization of public institutional change.     

Robbing the Riches: Capital Flight,Institutions and Debt

Capital flight undermines economic growth and the effectiveness of debt relief and foreign aid, and sometimes drains more resources from poor countries than does debt service. In an analysis of a large panel of developing and emerging market countries using annual data for 1970–2001, we show that both institutions and macro policies robustly affect capital flight. Our study also supports the existence of a revolving door relationship between debt and capital flight. More notably we find countries with weak institutions have a greater propensity to accumulate debt because weak institutions spur capital flight, which, in turn, creates a financing need.     

Neoliberal Law: unintended consequences of market-friendly law reforms

This paper offers a critical evaluation of the interrelation of law and economics in the context of development. The paper describes the current promotion of law reform by international institutions like the World Bank as the product of neoliberal economic theory. The analysis examines the role of law historically as an expression of economic orthodoxy, arguing that the Washington Consensus has determined the shape of law reforms, pointing them to the definition and protection of private property rights, aiming to separate politics from economics. The relative failure of these policies in their application to countries emerging from communism led to the expansion of the reform agenda to include market-supporting institutions, among them the rule of law. The paper assesses the extent to which this expansion means that the role of the law and the relationship of regulation to market have changed sufficiently to denote a Post-Washington Consensus. It concludes that the use of law reform to impose what neoliberalism considers ‘rational’ solutions undermines the legitimacy of democratic institutions in developing and transitional countries.     

CHANGING THE DECISION SPACE: EUROPEAN POLICY INFLUENCES ON ENERGY POLICY AND SYSTEMS CHANGE IN SWEDEN

The EU takes a growing interest in governing the energy sector in its member states. Competing with national institutions, policies and organizational structures, it is however not clear whether the EU exerts a strong influence compared to other factors, and if there is such an influence, the mechanisms are not well understood. This paper examines strategic reorientation towards electricity investment in the Swedish energy sector, a ‘frontrunner case’ of Europeanization, and discusses how this change can be attributed to EU policy change, national policy change and organizational field developments respectively. It finds that EU energy policy influence has been notable, and that governance mechanisms that shape beliefs and expectations are strongly at play. However, despite growing EU clout on energy policy, field level and national policy change remain key drivers of the changing decision space in the examined time period.     

Post-Cold War Vietnam: stay low,learn, adapt and try to have fun – but what about the party?†

The paper compares political ideas and acts in the Soviet Union under Gorbachev and in Communist Vietnam. It argues that the Gorbachev group, committed to progressive change, concluded that power granted to them by their position in the Soviet system needed to be eliminated, creating a ‘boot strap’ problem. To secure progressive change they had first to destroy their own power base. By contrast, the ruling Vietnamese Communist Party (VCP) attempted, in the two decades after the emergence of a market economy in 1989–1991, to rule an increasingly open society through Soviet political institutions. By the late ‘noughties’ Vietnam faced a crisis of domestic sovereignty, with politics largely a matter of spoils, with policy largely irrelevant and unimplementable, and usually blocked by powerful interests. The paper argues that Hinsley's notion of the sovereignty issue makes this situation far easier to analyse. It argues that the Gorbachev group's analysis would have led to them predicting that the VCP's attempt to use Soviet institutions to rule over a globalising and increasingly open society with a market economy would lead to a crisis of political authority, and that they would have been correct. This leads to the counter-intuitive position that the Communist Party of the Soviet Union was a success ? in that it managed to solve a serious political problem, i.e. how to create the preconditions for a political system suited to a market economy in a relatively open society – and the VCP a failure.     

State,institution building,and emerging stock markets in China

This article studies the institutional creation of Chinese stock exchanges and their regulations. It argues that institution creation was largely a function of market forces, local initiatives, path-dependence, and a learning curve. What characterized this institutional transformation was a process in which the central government was first led by various market forces fueled by local political and economic initiatives, then was forced to react by legislating various administrative ordinances to suppress the chaotic and lawless market, and finally resorted to creating a centralized regulatory institution to rein in the fledging stock market.     

Facing institutional change in Mostar: a litmus test for Bosnia and Herzegovina

The reconstruction of Mostar could have been a symbol of renewed multiethnic coexistence. Instead, it has become a synonym for failed institutions and divisions, mirroring the difficulties of the whole country. While imposition of both the 1996 and 2004 statutes establishing the city’s administrative units was connected with crisis, the city has also faced two major deadlocks, in 2008–2009 and 2012. In the first, a solution was imposed by the international community’s High Representative (HR). But the second remains unresolved, as the HR resists intervening. The aim of the paper is to analyze these impasses – moments when institutional change should have occurred, but for some reason did not. Even the solutions – acts of external imposition – might be treated at best as institutional pseudo-change that shows that imposed institutions have a particular inertia that resists change. The topic will be presented from the perspective of historical institutionalism, with special emphasis on the path-dependency approach, which refers here not only to the formal institutional structure of the city, but also to the decision-making processes in the moments of stalemate.     

Path Dependency and the Reform of English Local Government

This paper uses the concept of path dependency to examine the changes to the political management structures of English local government. We note how the possible experience of decreasing returns among some local authority actors combined with the powerful intervention of politicians within New Labour at the national level led to a significant break from past policy and the imposition of measures to establish a separate executive that was claimed as a radical step forward for local democracy. Using survey data from the Evaluating Local Governance research team ( http://www.elgnce.org.uk ), we explore the establishment of a separate political executive in all major local authorities and map out the style of decision-making that is emerging. We find that some established institutional patterns reasserted themselves in the process of implementation, but that increasing returns are not as great as some theorists of path dependency would suggest and they may be a force for system change as well as for stability.     

The Best Laid Plans: The Impact of Informal Rules on Formal Institutions in Transitional Regimes

How do informal institutions influence the formation and function of formal institutions? Existing typologies focus on the interaction of informal institutions with an established framework of formal rules that is taken for granted. In transitional settings, such typologies are less helpful, since many formal institutions are in a state of flux. Instead, using examples drawn from post-communist state development, I argue that informal institutions can replace, undermine, and reinforce formal institutions irrespective of the latter’s strength, and that the elite competition generated by informal rules further influences which of these interactions dominate the development of the institutional framework. In transitional settings, the emergence and effectiveness of many formal institutions is endogenous to the informal institutions themselves.