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This introductory chapter starts by summarizing the main conclusions of the earlier companion volume (European Integration and Supranational Governance), and describes the current volume as focusing on the institutionalism of Europe per se, rather than the question of how supranational arenas emerged and were institutionalized. It looks at the sources and consequences of institutionalization, i.e. the process through which European political space – supranational policy arenas or sites of governance, structured by European Union (EU) rules, procedures, and the activities of the EU’s organizations – has evolved. The five main sections of the chapter look at the institutionalist challenge, discuss institutions and institutionalization (institutional change, social and political space, institutions in relation to power, and rule-making and legitimacy), attempt to explain institutional change in the European Union (examining institutional innovation and its assessment), provide a brief overview of the book, and offer conclusions on the dynamics of institutionalization and the future of the European Union. The next nine chapters of the book are described as falling into three groups: the first set addresses the processes of institutionalization (Chs 2–4); the second set explores how specific European policy spaces have emerged, mutated, and stabilized through ‘endogenous’ processes of institutionalization (Chs 5–7); and the third set is concerned with the processes of institutional innovation – the creation of new policy spaces (Chs 8–10). A final chapter concludes by discussing the institutional logic of integration.

This is the first of three chapters on salient EU policy innovations and expansion between 2000 and 2002, and it looks at European monetary policy (monetary integration) in light of the introduction of the Euro on 1 January 2002. McNamara compares the introduction of the Euro with historical cases of currency unification, and demonstrates why patterns of legal, political, and social authority creation at the supranational level must be taken into account to understand recent developments. The first section of the chapter briefly outlines the history of the Euro and EMU (European Monetary Union), and the second examines the potential for currency to act as an engine of institutional innovation and expansion by reviewing the literature on comparative political development, and generating a template for understanding the specific mechanisms that might link currency creation to political development. The third section situates this theoretical discussion within a historical perspective on monetary and institutional change, and the final section turns to a discussion of the potential future trajectory of the EU, asking whether the similar origins of currency consolidation are likely to produce similar results in terms of broader state‐building effects as described in the comparative political development literature. It is argued that the American historical example suggests the potential paths towards a federal Europe that the introduction of the Euro may portend, most importantly in terms of fiscal capacity.

An analysis is presented of the creation and development of rules governing the organizational form and the policy content of the European Central Bank (ECB). The establishment of the ECB and the launching of the Euro constitute an extraordinary innovation, one that opens and organizes a new institutional space in Europe. The ECB system is assessed in the light of three broad theoretical approaches emphasizing, respectively, power politics, institutions as rational solutions to collective problems, and pre-existing normative (social) structures. Power politics and functional rationality approaches are found to fail to account for important aspects of the ECB’s rules and policy mandates, while, in contrast, a sociological emphasis on institutional context is useful in explaining the continuities linking the ECB to the normative structure that had previously developed – largely within the network of central-bank governors – and diffused throughout the organizational field in which monetary policy-making was embedded. It was the need to legitimize the new ECB in terms of these broader norms that shaped the ECB’s organizational structure and governing rules: in particular, pre-existing norms influenced three key aspects of the ECB – its political independence, its criteria for membership, and its rules for price stability.

Makes a broad historical account of the specific mode of development in Europe, involving unique progress economically, militarily, and democratically. In disagreement with the economic approach launched by Moore, and the state system theory championed by Hintze, it is argued that it was the introduction at an early stage of a special form of state – the interactive state – that made this development possible. This institutional innovation gave Europe the edge, as it stimulates, at the same time, effective governance and economic development.

As a basic framework of this book, development of the social system is considered a process of interactions between the economic subsystem and the cultural-institutional subsystem. The former consists of activities combining economic resources (labour, capital, and natural resources) through technology to produce goods and services useful for human living. These economic activities are coordinated and controlled by the latter, which consists of institutions (the rules of society) and culture (people's value system). A model is developed to conceptualize how technological and institutional changes interact with each other, how they respond to changes in resource endowments, and how such responses are governed by cultural traditions.

In Sri Lanka, the major institutional innovation introduced since the 1980s is the Irrigation Management Transfer (IMT) to water user associations (WUAs). In situations where top-down transfer occurred, the achievements have been limited. There is a modest increase in yield but gains in terms of cost recovery, efficiency, equity, etc., have not been significant. A review of literature in this chapter indicates that the bottom-up approach seems to be better than the top-down approach, at least in the short term when it comes to irrigation water management.

In Ghana, Kenya, and Uganda, governments have been willing to devote lawmaking effort and scarce resources to the clear definition and adjudication of land rights. However, making institutions function on limited budgets and in all areas of the country is challenging. It requires political will that extends beyond law making and into areas of both enforcement and public awareness. In communities where the state does not enforce property rights, institutional innovation will occur to ensure that property rights are protected. Institutional innovation in a number of sites has included specialists in violence, bureaucratic entrepreneurs, and NGOs. However, the institutions that organically develop to define and protect property can blur the lines between state and non-state processes or may be suboptimal in nature, creating negative externalities for the societies in which they function.

This chapter examines the application of new financial technologies in order to ensure the availability of the right money at the right time for international cooperation. It describes the lessons that can be learned from the experiences of governments that have attempted to resolve resource constraints nationally. These lessons include the importance of institutional innovation in successfully adopting and implementing financial innovation, and the creation of special-purpose facilities to address particular challenges posed by financing innovation.

This chapter explores how the British military, convict workforce, and British government financial outlays laid the early foundations of a tiny local economy at the outer margins of a vast imperial project. From the 1820s, Australia's prosperity rested, initially, on the productivity of its labor force—convicts, emancipists, and free immigrants—and the occupation and exploratory utilization of a large area of natural grassland primarily for the production and export of wool. This geographical settlement and pastoral development occurred in a rapidly evolving institutional setting. Both in the economic and political spheres, institutional innovation and adaptation appears successfully to have underpinned the attainment of quite high incomes per capita even before the discovery of gold.

The relationship between nonprofits, states, and markets is changing. Researchers' understanding of this relationship conventionally depends on the assumption of sector-specific institutional environments that, in their variety, offer an antidote to rationalization around unitary institutional logics. Many have noted that the last thirty years have witnessed the abandonment of many postwar institutional arrangements. This shift has been based on a highly contingent process of institutional innovation and has resulted in new modes of governance that defy the traditional market–state dualism. These experiments and transformations challenge the conventional juxtaposition of states, markets, and nonprofits. In order to understand this institutional transformation, this chapter examines the reconstitution of urban governance through the analytical lens of nonprofit housing production. Although not a general argument, the case it examines does shed light on the contemporary transformation and, in particular, highlights the changing role of nonprofit organizations in institutional experimentation and new modes of governance.

This chapter covers the application of new growth theories that focus on institutions to China’s growth path. It describes the so-called ‘institutional innovations’ which allowed the Chinese state to create property rights without a change in ownership from public to private, appealing as a gradualist reform path. But as the economy became increasingly complex due to increased exposure to competition, legal reforms played a greater role in the decentralised market, such as through the creation of regulatory agencies which enabled capital market development. The underdeveloped legal system is itself part of the ‘paradox’ of China’s growth; and a detailed examination will show that China’s legal reforms have been somewhat underappreciated, although a great deal more in terms of reforming their effectiveness is needed for the second thirty years of growth.

This chapter explains a theory of institutional innovation, in which shifts in the demand for institutional innovation are induced by changes in relative resource endowments and technical change. It considers the impact of advances in social science knowledge and of cultural endowments on the supply of institutional change and examines the forces that act to shift the demand and supply of institutional innovation. The chapter concludes with a description of the elements of a general model of institutional change.

This concluding chapter revisits arguments about institutional innovation and, by extension, the future of neo-corporatism. It argues economic globalization and rapid technological change may make countries, even predominantly market-oriented economies, even more likely to strike competitive corporatist pacts. Creative corporatist arrangements are also likely to feature prominently as countries grapple with disruptive shocks, although this form of institutional conversion is most likely to occur in the countries that have done the least to reform their neocorporatist institutions and will evolve over time as countries confront disruptive new challenges. The remainder of the chapter discusses conservative corporatism, unilateral liberalization, competitive corporatism, and creative corporatism. It concludes with insights for the future of European corporatism. It suggests that convergence on a liberal economic model is unlikely, even as economic internationalization and technological competition intensifies. Far from weakening institutionalized cooperation among organized actors, economic crises may reinforce or even increase reliance on neo-corporatist institutions.

This chapter highlights plebeianism as a political philosophy in the works of Martin Breaugh and Jeffrey Green and provides an in-depth analysis of recent attempts at retrieving the mixed constitution and proposing institutional innovations by John McCormick and Lawrence Hamilton. It looks at McCormick's proposals to revive the office of the Tribunate of the Plebs and bring back plebeian power to exert extraordinary punishment against agents of corruption. It also argues that McCormick's radical republican interpretation of Niccolò Machiavelli places class struggle, the threat of plutocracy, and the need for popular institutions to control the rich at the center of material constitutionalism. The chapter explores the illiberal nature of McCormick's proposals and the legitimacy problems arising from lottery as mode of selection. It explores Hamilton's proposal to combine consulting participatory institutions with an updated tribune of the plebs and a plebeian electoral procedure.

This chapter discusses an approach to the sources of demand and supply for institutional change. It explores the use of social science knowledge and role of social scientists in the design and evolution of institutional innovations and examines the contribution of agricultural economics research to the design and evolution of the “direct payment” approach to farm price and income policy. The chapter concludes with the definition of institution, which includes behavioral rules that govern patterns of relationships and actions, and decision-making units that consists of government bureaus, firms, and families.

This chapter analyses the impact of domestic pressures and the Europeanisation of environmental policy on the domestic institutional framework in Ireland. It presents case studies to highlight the range of environmental problems Ireland has faced and how public and private actors have responded to these challenges. This chapter argues that Europeanisation has led to adaptational pressures resulting in legal harmonisation and some institutional innovation. It also investigates whether the progressive change that has occurred in environmental policy, and the way in which public and private actors seek solutions to environmental problems, are reflected in new patterns of governance.

This concluding chapter assesses the impact of Roman imperial rule on the impetus toward innovation. Although the political and economic unification of the Mediterranean reduced transaction costs, it may also have reduced the drive toward innovation in both a technological and an institutional sense. As such, the chapter presents the idea that the politically unified Roman Mediterranean was unlikely to produce the accelerating pace of technological and institutional innovation seen in late-medieval and Early-Modern Europe. That notion would certainly need further study and demonstration. But however preliminary at present, it might help explain why only the fragmented world that emerged out of the ruins of the Roman Empire would eventually achieve the breakthrough progress that would bring the fruits of the Industrial Revolution.

This Afterword consolidates and summarizes the findings revealed by the studies and analyses undergone throughout the book. It concludes that innovation is even more important in today’s globalized economy. The technological leadership of the United States is seen to be mainly influenced by institutional supports for the market in technology. The United States has been fortunate, thus far, to have its institutions be capable of adapting over time to changing circumstances in the market for technology. An example of the importance of institutional innovation in promoting technological advance is the massive growth of venture capital. We can add to this the institution of the U.S. patent system, which fostered further development of ideas and creativity, especially after such innovations were presented at the Crystal Palace Exhibition of 1851. It is this institutional edge that keeps the U.S. above other countries with technological potential such as China, India, and Brazil.

This chapter describes the July 3, 2001 Development Plan as an institutional innovation generated during the master planning process to replace the existing building-by-building review under Town zoning. Basically, the University's Development Plan said to the Town, “this is our ten-year list of expected projects that we would like you to review and approve as a comprehensive development program, rather than subjecting each new building to individual special use permit reviews.” Its benefit to the Town was that decision-makers could address all of the impacts of anticipated development in one comprehensive review process. Its benefit to the University was that building could proceed more expeditiously once the Development Plan had received Town approval.