Many believe that economic development is primarily a function of institutions that help societies reap potential gains from interdependent actors. The norms, rules, and organizations that "govern" transactions are meant to resolve the collective action problems at the heart of economic development. Recognition that institutions are key to economic growth and to the distribution of resources is reflected not only in scholarly literature on property rights and public agencies, but also in the advice of development agencies that encourage the construction of pro-market institutions. Yet claims that "institutions matter" begs an important question: Where do "good" institutions (those that facilitate efficient and equitable outcomes) come from and why do they evolve the way they do? Explaining Institutional Innovation explores these issues, adopting the argument that institutional innovation requires "tough times" during which leaders see themselves as highly vulnerable to internal pressures and external threats yet lack the means to address them. Analyzing business associations and states in Latin America, private sector organizations in China, the Office of the Historian of Havana, the Association of Caribbean States, Caribbean universities, and sugar industries in Southeast Asia, the contributors affirm the vulnerability approach by demonstrating how various types of crises precede and stimulate institutional changes. Also, by highlighting the impact of such factors as more proximate political arrangements and structures of elite political competition, contributors suggest further avenues for institutional analyses.
