This paper analyses the influence of political institutions on the development of financial cooperatives. It proposes a political economy theory where autocratic regimes deliberately oppose the development of a well-functioning financial cooperative sector to maintain their political influence, and prevent the formation of strong pressure groups that can threaten the current political status quo and reduce the governing elites’ economic benefits from underdeveloped and exclusive financial sector. Using panel data from 65 developing countries from 1995–2014, the results show that democracy, political rights and civil liberties promote financial cooperative development. These results are robust in controlling for endogeneity as well as other economic and institutional factors.

One of the many favourable aspects of the collapse of the USSR was the vastly increased access to the archives of Soviet institutions by historians, economists and other specialists that resulted. This led to an intense study, by specialists from the successor states of the USSR, mainly Russia (which inherited the archives of all the central Soviet institutions), and by foreign academics, of the huge mass of documents on the Soviet period accumulated in what became the archives of the successor states. One major result of this study was the publication of a large mass of archival documents. By now, not only individual volumes, but a number of series of volumes, containing original documents in a wide variety of fields, have been published. In addition, numerous articles and books utilizing archival sources have been published. Furthermore, some archival documents containing previously unknown information are now available on the web. For example, Ukrainian archivists have placed on the web numerous documents relating to the 1933 famine in their country. This new approach to the study of the USSR, and the additional knowledge resulting from it, is known as the archival revolution in the analysis of the Soviet system. Overviews of the new insights thus obtained about Stalinism have recently been published both by historians (Khlevnyuk, 2001; Litvin and Keep, 2005) and economists (Gregory, 2004; Gregory and Harrison, 2005), two journals/annuals have published special issues on the archival revolution, and there is a website devoted to political economy research in Soviet archives (http://www.warwick.ac.uk/go/persa). The purpose of this paper is to provide a survey of the new knowledge which is shorter than Gregory and Harrison's survey article, links the new knowledge to what was previously known, discusses some issues excluded from previous surveys, and considers questions likely to be of particular interest to JOIE readers.

For various reasons, governments sometimes fail to provide public goods. Private provision of such goods might then be used if it succeeds in overcoming three main problems: high organization costs, the assurance problem, and the free-rider problem. We argue that technologies that enable crowdfunding – the method of funding projects by raising small amounts of money from a large number of people via the internet – have enabled these problems to be overcome more readily. Such technology has lowered organization costs and enabled the employment of more efficient mechanisms to reduce the assurance and free-rider problems. To illustrate these effects, we present two case studies of private provision of public goods via crowdfunding: police services in Rockridge in Oakland, California, and the Ukraine Army.

Institutional inertia as one of the underlying reasons for hysteresis is often ascribed to external factors such as the distribution of wealth and income. Complementing these findings, the paper focuses on important internal factors, which render institutions stable and which prevent fast institutional changes, namely the role of mental models. Their importance is derived from the analysis of an important set of institutions, which can be described as enabling rules. Such rules enable actors to do certain things, such as speaking a language or playing chess. In doing so, enabling rules arguably require complementary mental models, which contain not only knowledge about the rules and the context in which they are applied, but also about how to apply the rules successfully. An important implication of this conceptualisation is that institutions and their representation are interdependent and mutually stabilising.

This paper provides an empirical analysis linking two theories of firms' strategic behavior. We analyze corporate strategies in the emerging global market for liquefied natural gas. First, following Porter, we identify three strategic target market positions: chain optimization, flexibility strategy, and national oil companies (NOCs). Each target market position is supported by an underlying resource profile. Second, following transaction cost economics, we hypothesize that specific investments under uncertainty provide incentives to integrate vertically. We test these economic relationships empirically applying a two-stage procedure. Estimation results show that the three strategic choices of target market position, resource profile, and organizational structure are interrelated. We show that NOCs rely on less idiosyncratic assets than companies following a flexibility strategy and companies following a flexibility strategy rely on less idiosyncratic assets than chain optimizers. An increase in hold-up potential results in a higher probability of a firm organizing transactions within its own hierarchy.

Economic freedom is robustly associated with income growth, but does this association extend to the poorest in a society? In this paper, we employ Canada's longitudinal cohorts of income mobility between 1982 and 2018 to answer this question. We find that economic freedom, as measured by the Fraser Institute's Economic Freedom of North America (EFNA) index, is positively associated with multiple measures of income mobility for people in the lowest income deciles, including (a) absolute income gain; (b) the percentage of people with rising income; and (c) average decile mobility. For the overall population, economic freedom has weaker effects.

This paper examines two potential mechanisms – access to credit and reduction in relational risks – through which social trust can affect R&D investments. Social trust can increase R&D investments by expanding firms' access to external finance with which they can use to fund promising R&D projects. It can also increase R&D investments by reducing relational risks that expose firms to ex-ante and ex-post holdups or expropriation risks. Using industry-level data on R&D investment intensities in 20 OECD countries, I test these mechanisms by evaluating whether more external finance dependent and relational risk vulnerable industries exhibit disproportional higher R&D investment intensities in trust intensive countries. The results indicate that external finance dependent industries and relational risks vulnerable industries experience relatively higher R&D investment intensities in trust-intensive countries. Therefore, the results underline access to external finance and reduction in relational risks as causal pathways linking social trust and R&D investments.

The notion that business corporations should be managed for the exclusive benefit of shareholders has been widely challenged. In particular, critics have argued that directors are authorised to serve the interests of the corporation: a legal entity that is completely separate from its shareholders. However, the premise that shareholders have sole legitimate claim to ‘membership’ has rarely been questioned. This article explores medieval thought on ownership, authority and participation in guilds, churches, towns and universities, and shows that membership can be understood as participation in, and shared responsibility for, a group's distinct collaborative activity over time. Our theory suggests that ‘membership’ in the modern corporation extends to non-shareholding stakeholders, but with the implication that ownership and authority are vested in the members as a body and not in a separate entity.

Can foreign aid help free the press? Aid may boost press freedom by incentivizing government to reduce media regulations and provide financial support for infrastructure. Alternatively, foreign aid may prevent press freedom by expanding the role of the state and promoting government over private enterprises. We contend that the magnitude of foreign aid's influence is conditional on the existence of democratic checks. Using panel data from 1994 to 2010, we find evidence suggesting that aid significantly increases press freedom in democracies but insignificantly relates to press freedom in autocracies. Collectively, the results suggest that a standard deviation increase in aid to a country at the mean level of democracy increases press freedom by approximately a 1/20th standard deviation. Overall, the findings suggest that donors should be cautious as most aid recipients are not democratic and aid leads to only relatively small marginal improvements in press freedom.

Since the end of the shakeout following the bursting of the dot com bubble, we have seen substantial innovation in the institutions and organizational arrangements used to finance early-stage high growth technology companies. This paper will document the emergence of business accelerators, angel groups, micro venture capital funds and online equity crowdfunding platforms, and show the rapid growth in angel investing over this period. It will also document the corresponding movement away from traditional venture capital activity at the early stage of company development. The paper will explain how technological advance, specifically the decline in the cost of bringing a new software product to market, has driven this shift in the institutions of early-stage finance.

This paper shows that the revolving door generates inequality of influence between financial firms and creates economic distortions. We first develop a theoretical model, introducing the notion of “bureaucratic capital” and stressing how the revolving door generates inequality in bureaucratic capital leading to inequality in profits. Then this prediction is tested, using a new database that tracks the revolving door process involving the 20 biggest US “diversified banks.” We show that regulators who supply a large stock of bureaucratic capital are more likely to be hired by the top five banks. We also develop indices of the inequality of influence between banks. We show that banks in the top revenue quintile concentrate around 80% of revolving door movements. Goldman Sachs appears as the prime beneficiary of this process, capturing approximately 30% of the total stock of bureaucratic capital.

Financial institutions in developing economies fail to provide entrepreneurs with access to finance to grow their businesses. This severely hampers economic development in these countries. We seek to explain why and develop an argument and model based on Knight's theory, which we augment in two ways. First, by describing problems embedded in financial institutions of developing economies, for which we use the Schumpeterian view that creative destruction requires new credit to fund entrepreneurial disruption and de Soto's finding that undocumented assets possessed by entrepreneurs in developing economies cannot be leveraged as collateral to access finance. Second, we use Williamson's hierarchical institutional model to distinguish vertical interactions. The model is illustrated using the case of Uganda, a developing country in Eastern Africa. Our analysis finds that Uganda suffers from intertwined and misaligned formal and informal institutions, limited extent of codified property, and sparse access to finance. The findings prompt policymakers in developing economies to consider problems with and within financial institutions.

We examine brand building from the perspective of complex adaptive systems. Brand building is a neglected engine of capital formation, innovation and institutional change in market economies. The nature of brands and the service streams they generate have been construed too narrowly. Brands are capital: entrepreneurs use brands as market-making devices that create value and capture profit, while consumers use brands to derive psychic income and lifestyle benefits. Brands are building blocks that can be combined in production to fill perceived gaps in brand architectures and capital structures. These structures are themselves complex adaptive systems. In an era of digital technological platforms, complex generative networks are the institutional locus of brand creation and brand extensions. Innovation in brand building is a socially distributed, service-intensive and interpretive process; it entails combinatorial experiments in resource integration by heterogeneous and socially connected actors, such as entrepreneur-producers, end-users and distributors. Legal brand owners never have total control over their brands – customer networks often exercise substantial de facto control rights (economic property rights) over the use and transformation of brands. Both the entire branding system (as a form of organization) and individual iconic brands can crystallize into relatively stable institutions that orient and coordinate market behaviour.

In The New Industrial State John Kenneth Galbraith famously argued large corporations would seek to manage the demand for their products. Although attracting a degree of attention and notoriety around the time of publication, Galbraith's thesis of the direct manipulation of the consumer has slipped somewhat from view in favor of a view of advertising as information provision. We reconsider Galbraith's theory of the Management of Specific Demand and illuminate its salience in the context of the US tobacco industry. We conclude that the US experience is congruent with many of the claims that Galbraith made regarding the manipulation of the consumer by large corporations and thus warrants rehabilitation of the Galbraithian view.

Critical realists have gained substantial support within post-Keynesian and Marxian research communities, and it is likely that critical realism's influence in institutionalism will grow in coming years. Post-Keynesians and Marxists have had ongoing discussions regarding the strengths and weakness of critical realism. Institutionalists should have a similar discussion. This paper addresses a key feature of the critical realist program: its critique of mainstream economics. In particular, it criticizes the use by critical realists of the concept of closure, and argues that critical realism is misleading in its identification of the ontology of mainstream economics as Humean. The purpose of the paper is to promote critical discussion regarding the role of critical realism in institutionalism.

This paper devises a simulation model that combines insights from the evolutionary perspective on the division of labor with ideas from the labor process literature. It characterizes technical change and the development of a near-decomposable production process as the outcome of technological search and of organizational problem solving, where the conflict between workers and firms over the organization of work plays a central role. It is argued that a near-decomposable organization of the production process also allows management to tighten its control over workers. Consequently, more extensive divisions of labor within a firm develop where the power of workers to oppose decisions by the management is low. In these scenarios the performance of firms is also highest. The model is used to interpret historical evidence about different development paths in technical change in the UK and the US at the beginning of the twentieth century.

This article contributes to an institutional economics analysis of the public economy by answering the following question: what is the role of intergovernmental grants in laboratory federalism? In line with factual evidence, the fiscal federalism literature on policy experimentation hints that grants can be employed to stimulate policy innovation through trial and error learning. Yet it lacks a theory of policy experimentation through grants, meaning that, in effect, we lack a fiscal theory of laboratory federalism. In the proposed approach, an intergovernmental grant is likened to a fiscal institution for political compromise between levels of government that frames policy experimentation options and constraints. At the same time, since policy solutions are not always easy to find or to implement, policy experimentation requires some degree of flexibility. Thus, the article shows that the extent of experimentation induced by a grant is influenced (or, more fashionably, nudged) by the conditionality attached to the grant. It argues, moreover, that if a grantor would like to induce more (less) experimentation, then, all other things equal, a grant with fewer (more) conditions attached should fare better than a grant with more (fewer) conditions attached.

Economists have been investigating the link between institutions and economic performance for several years. While econometric studies of this link have flourished, they are of limited use in understanding the causal mechanisms making some institutions responsible for economic performance. Several works using game theory and akin to the ‘new institutional economics’ have entertained the goal of developing micro-explanations of the institutions–performance link. Because game theory focuses on individuals’ actions and beliefs, game-theoretic studies of institutions are thought to oppose more ‘structuralist’ explanations that downplay the role of individual agents and put more emphasis on the importance of social (or ‘macro’) structures. This paper demonstrates that this claim is misconceived, as the micro-explanations produced by game-theoretic models must assume already existing macro-structures. Institutions produce downward effects, shaping each agent's action. Moreover, in a game-theoretic framework, macro-structures are constitutive of individual agency since, without them, agents would often be unable to choose. I illustrate this claim with the example of Avner Greif's study of the role of cultural beliefs in the economic organisation of medieval societies.

This article complements Ha-Joon Chang's critique, entitled ‘Institutions and Economic Development: Theory, Policy and History’, of the ‘dominant discourse’ on institutions and economic development which takes the view that getting the institutions right (by strengthening private property rights and market freedoms) is a prerequisite for development. It does so by commenting on the concepts of economic development and institutions, discussing the theory of how institutional change affects development, and examining the possibility and desirability of such institutional change as a prerequisite of development.