The Institutional Dynamics at the Origin of a New Method of ?Local? Administration: the Relationship between AEROSPATIALE and its Subcontractors DAMIEN TALBOT LEREP In the last twenty years, interactions between the Aeronautical Branch of AEROSPATIALE and its subcontractors have evolved radically. From a system of fragmented regional subcontractors centered around AEROSPATIALE establishments, a network of businesses, much reduced in number and characterised by stronger links and a withdrawal from the notion of territorial boundaries, has been formed under the aegis of a principal contractor. This paper examines the reasons behind such upheavals and, in particular, how the principal contractor has managed to impose such changes and why. In answering these questions, this paper focuses both on the market and non-market interactions between the economic players. In order to fully understand the reasons behind these players? behaviour, it is necessary to take account of the principles of non-market interaction. As these apply to interactions between principal contractors and their subcontractors, the notion of power is central. At least one theory, that of American institutionalism, implicates power imbalances between players as the major factor in their changing behaviour. This theory is advanced further by COMMONS through the notion of conflict. This last approach proposes that institutions themselves provide a setting for actions and thus one cannot fully understand the evolution of behaviour without first understanding the role played by these institutions, not only as to how they influence economic behaviour, but more importantly in understanding the actual processes underlying institutional change itself. In order to identify these processes, as institutions and behaviour evolve hand in hand, this paper proposes, as a useful starting point, to examine the distinction between the terms institution and organisation, in order to then define institutional change. These definitions will subsequently be applied to the evolution of the relationship between AEROSPATIALE and its major subcontractors. This paper hopes to show that the evolution is the result of the role played by GIE AIRBUS in altering the mindset of the AEROSPATIALE group. Finally, this paper will describe the effect this institutional change has had on AEROSPATIALE?s method of local administration. It must be pointed out that the term ?local? here has no defined boundaries and is to be determined by reference to businesses established in a territory and/or an a-territorial network. REFERENCES ARROW K. (1994) Methodological Individualism and Social Knowledge, Am. Econ. Rev. 84, 1-9. BAZZOLI L. and DUTRAIVE V. 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