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Endogenous dynamics of institutional change

Author

Listed:
  • Daniel DellaPosta

    (Cornell University, USA)

  • Victor Nee

    (Cornell University, USA)

  • Sonja Opper

    (Lund University, Sweden)

Abstract

A parsimonious set of mechanisms explains how and under which conditions behavioral deviations build into cascades that reshape institutional frameworks from the bottom up, even if institutional innovations initially conflict with the legally codified rules of the game. Specifically, we argue that this type of endogenous institutional change emerges from an interplay between three factors: the utility gain agents associate with decoupling from institutional equilibria, positive externalities derived from similar decoupling among one’s neighbors, and accommodation by state actors. Where endogenous institutional change driven by societal action is sufficiently robust, it can induce political actors to accommodate and eventually to legitimize institutional innovations from below. We provide empirical illustrations of our theory in two disparate institutional contexts—the rise of private manufacturing in the Yangzi delta region of China since 1978, focusing on two municipalities in that region, and the diffusion of gay bars in San Francisco in the 1960s and 1970s. We validate our theory with an agent-based simulation.

Suggested Citation

  • Daniel DellaPosta & Victor Nee & Sonja Opper, 2017. "Endogenous dynamics of institutional change," Rationality and Society, , vol. 29(1), pages 5-48, February.
    • Handle: RePEc:sae:ratsoc:v:29:y:2017:i:1:p:5-48
    DOI: 10.1177/1043463116633147
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    References listed on IDEAS

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    Cited by:

    1. Arnout van de Rijt, 2017. "Microfoundations of institutional change," Rationality and Society, , vol. 29(1), pages 63-68, February.
    2. Zoltán Farkas, 2019. "The concept and coverage of institution," Rationality and Society, , vol. 31(1), pages 70-97, February.
    3. Håkan J. Holm & Victor Nee & Sonja Opper, 2020. "Strategic decisions: behavioral differences between CEOs and others," Experimental Economics, Springer;Economic Science Association, vol. 23(1), pages 154-180, March.
    4. Randall Calvert, 2017. "Strategic rationality and endogenous institutional change," Rationality and Society, , vol. 29(1), pages 91-110, February.
    5. Sonja Opper & Fredrik N. G. Andersson, 2019. "Are entrepreneurial cultures stable over time? Historical evidence from China," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1165-1192, December.
    6. Martin Ruef, 2017. "Ecological and rational choice models of endogenous change," Rationality and Society, , vol. 29(1), pages 55-62, February.
    7. Leutert, Wendy, 2021. "Innovation through iteration: Policy feedback loops in China’s economic reform," World Development, Elsevier, vol. 138(C).

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