In this paper we discuss the origins and emergence of organizational routines and capabilities. We first argue that there are theoretical and endogeneity-related concerns associated with the key antecedents and mechanisms specified by the extant routines and capabilities literature. Specifically, we explicate the behaviorist and empiricist foundations of the organizational routines and capabilities literature and the extant emphasis placed on experience, repetition, and observation as the key antecedents and mechanisms of routines and capabilities. Based on this discussion we highlight several, endogeneity-related concerns, namely: (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We introduce the ‘poverty of stimulus’ argument and discuss how an internalist or rationalist, choice-based approach can provide a more fruitful (though preliminary) foundation for understanding organizational behavior and capabilities.

Drawing on current biology, we argue that the phase space of economic evolution is not stable. Thus, there are no entailing laws of economic dynamics. In this sense, economic dynamics are creative and the economy is not a causal system. Because economic dynamics are creative, the implicit frame of analysis for the econosphere changes in unprestatable and non-algorithmic ways. New-venture, social, and political entrepreneurs solve the frame problem of the econosphere. Economic evolution is unpredictable, not entailed, and the number of things traded (‘cambiodiversity’) increases over time. Our metatheoretic framework points out how institutions, entrepreneurs, and disparate actors enable what we call ‘novelty intermediation’. We provide examples of novelty intermediation from Rennaissance Italy to Silicon Valley. Our framework does not automatically provide clear policy prescriptions in part because our main result is negative. It may nevertheless provide a useful prolegomenon to a future economics fit for a creative world.

This paper is an analysis of the role reputation plays in the Deep Web using data from the Internet black-market site, The Silk Road. This encrypted online marketplace employed cryptocurrency and functioned over the Tor network. Utilizing a modeling technique, informed by trade auction theory, we investigate the effect of seller reputation. Analysis of the seller's reputation gives us insights into the factors that determine the prices of goods and services in this black marketplace. Data on cannabis listings is parsed from the Silk Road website and covers an 11-month time period, from November 2013 to October 2014. This data demonstrates that reputation acts as a sufficient self-enforcement mechanism to allow transactions. These findings exemplify the robustness of spontaneous order with respect to the Deep Web as an emergent marketplace.

In their stimulating paper, Hindriks and Guala (2014) bridge the prominent alternative conceptions of institutions-as-rules and institutions-as-equilibria, by proposing a ‘rules in equilibrium’ interpretation. This comment argues that the task of defining institutions as a class of phenomena is different from the tasks of understanding or analysing them. Definitions are classification devices and are typically ill-based on behavioural outcomes such as equilibria. Accepting the useful insights of the Hindriks and Guala (2014) article, attention to the matter of definition reinstates a rules-based approach, notwithstanding the importance of understanding and analysing equilibria. The comment establishes a broad definition of institutions as systems of rules, which includes organizations. Finally this comment raised some of the problems involved in understanding the nature of institutional rules.

This article briefly describes some of the intellectual challenges during the last half-century to the traditional fields of economics and political science: the public choice approach, the tragedy of the commons debate, the ‘new’ institutional economics, and behavioral game theory. Then, the components of a basic institutional analysis framework are presented that provide a general method for analyzing public economies and diverse forms of collective action. Empirical research related to metropolitan public economies, common-pool resources, and behavioral game theory is summarized that has contributed to the field of institutional analysis. The last section concludes that the macro foundations of institutional analysis appear firmer than the micro foundations related to the model of the individual to be used and discusses this puzzle.

According to the dominant ‘nexus of contracts’ and ‘collection of assets’ views of the firm, the firm is a either a fiction or an aggregate. Although legal personality is important in both accounts, everything is said to be achieved by private contract alone and the law's role in creating legal entity status is dismissed. The paper challenges both these aspects by reconsidering an alternative ‘real entity theory’ that dominated debates at the turn of the twentieth century. This forgotten view holds that the firm is neither a fiction nor an aggregate but a real entity, and underlines the creation of legal entity status as a fundamental role of the law. The paper discusses this view's ontological and legal insights, clarifies the proposition that the firm is a real entity, and proposes it as a starting point for a theory of the firm.

Over the last three decades entrepreneurship has become a hot topic in economics and management. Much of the entrepreneurship research literature has built upon insights of economists such as Schumpeter, Knight, and Kirzner, each of whom has inspired a distinct strand of entrepreneurship theory and application. Schumpeterian innovation and Kirznerian alertness are the best-known concepts of entrepreneurship, but a newer research stream is building on Knight's idea of entrepreneurship as judgmental decision-making under uncertainty. What we call the judgment-based view models entrepreneurs as owning, controlling, and combining heterogeneous assets, which differ in their attributes, and deploying these assets within a firm to produce goods and services in anticipation of economic profit. This Forum presents three papers that develop, extend, and challenge the judgment-based view of entrepreneurship, focusing on the foundations of judgment, the processes of entrepreneurial resource assembly, and the relationship between the judgment-based view and other theories of economic organization.

Douglass North's writing on institutional change recognized from the very start that such change depends on cognition and beliefs. Yet, although he focused on individual beliefs, we argue in this paper that such beliefs are social constructs. We suggest that institutions – rules, expectations, and norms – are based on shared cognitive rules. Cognitive rules are social constructs that convey information that distills and summarizes society's beliefs and experience. These rules have to be self-enforcing and self-confirming, but they do not have to be ‘correct’. We describe the characteristics of such rules in the context of a market for ideas, and illustrate their importance in two developments central to the growth of modern economies: the rise of the modern state with its legitimacy based on consent, and the rise of modern science-based technology that was the product of the scientific revolution and the Enlightenment.

The trajectory of institutional economics changed in the 1970s when new institutional economics (NIE) began to take shape around some relative vague intuitions which eventually developed into powerful conceptual and analytical tools. The emergence of NIE is a success story by many measures: four Nobel laureates in less than 20 years, increasing penetration of mainstream journals, and significant impacts on major policy debates. This rapid acceptance is remarkable when we consider that it was divided from birth into distinct schools of thought. What will be the future of NIE? Will it be quietly absorbed by mainstream theory, or will it radically transform neoclassical economics into a new paradigm that includes institutions? To address these questions, we follow the sometimes-bumpy road to NIE's current successes and ponder the challenges that lie ahead.

A popular explanation for economic development is that ‘individualistic values’ provide a mind-set that is favorable to the creation of growth-promoting institutions. The present paper investigates the relationship between individualistic values and personal attitudes toward government intervention. We consider two key components of an individualistic culture to be particularly relevant for attitude formation: self-direction (‘social’ individualism) and self-determination (‘economic’ individualism). Results indicate that both are negatively associated with interventionist attitudes. Effects of self-direction are much weaker though, than self-determination. Moreover, the effects of self-direction are mitigated through higher trust in the state and lower confidence in companies, while that is not the case for self-determination values. We conclude that especially economic individualism supports attitudes conducive to the formation of formal market-friendly institutions.

This paper applies the principles of organization economics (an offshoot of organization theory and a cousin of the New Institutional Economics) to a variety of organizations, mainly public ones. Organization economics seeks to understand and improve the ways in which organizations overcome agency costs, information costs, and other obstacles to efficiency. The private organization discussed in the paper is the modern publicly held (that is, dispersed ownership) business corporation, and the particular problem on which I focus is excessive executive compensation as a symptom of weaknesses in corporate governance. I then discuss two public organizations involved in national security – the US intelligence ‘community’ (a kind of mega-organization) and the Federal Bureau of Investigation in its role as the nation's principal domestic intelligence service. Both exhibit significant dysfunction that organization economics can help us to understand and overcome. I then discuss two types of public organization that have been more successful in overcoming obstacles to organizational efficiency: the judiciary of common law nations, such as the United States, and the very differently structured judiciary of civil law nations, such as France, Germany, and Japan.

This paper is a first attempt to apply a robust political economy framework to explain when Special Economic Zones (SEZs) can contribute to economic development. A robust political economy is one that channels the actions of self-interested individuals with limited information to promote economic progress. In the right institutional context, SEZs tend to promote economic growth. In the wrong institutional context, they can cause resource misallocation and rent-seeking. Policy makers introducing SEZs must overcome the knowledge problem to avoid misdirected economic planning. Yet, the scheme can only fulfill its purpose if it also prevents destructive rent-seeking behavior, both from businesses and from government authorities. The political economy framework of SEZs can be applied to judge their potential efficacy, something that orthodox studies of country features such as natural resources, infrastructure, and zone location fail to do. The Indian and Chinese experiences with SEZs illustrate these points.

How can economists use qualitative evidence – such as archival materials, interviews, and ethnography – to study institutions? While applied economists typically rely on quantitative evidence and statistical estimation, many important aspects of institutions and institutional change appear in the form of qualitative evidence. This raises the question if, and how, social scientists trained in quantitative methods can exploit and analyze this evidence. This paper discusses two qualitative research methods that are both commonly used outside of economics: comparative case studies and process tracing. Drawing on existing research about crime and political revolutions, it discusses these two methods and how to implement them to improve institutional analysis.

Investigations of a society's competitiveness aim to trace the causal mechanisms behind patterns in wealth and poverty across societies. This paper argues that to be productive such investigations must be comparative, historical, and political economic in nature. Comparative historical political economy is how social scientists generate useful knowledge about the wealth and poverty of nations. Our contribution is a methodology – or rather a collection of methodologies – for understanding national competitiveness and attempts to improve it: one focuses on political-economic analysis, another on historical analysis, and a third on comparative analysis.

In this study the international trajectories of mature district evolution are investigated as a special case of institutional change, and a theoretical model for their evolution is proposed. This model is based on the idea that international growth and re-positioning represent the fundamental alternative to district sterilization and decline, in a framework where global markets provide the major pressure for change or decline but could also provide new opportunities for renewal. Alternative paths emerge from the combination of trigger events due to globalization and district leaders' behaviour: disembeddedness, re-embeddedness and multiple embeddedness are proposed here as the three main outcomes of mature district evolution. The latter constitutes a new construct introduced in this study in order to explore the possibility that districts relate themselves to global space creating similar systems abroad and/or establishing ties with existing systems, each one representing both a local network and a node of a global network.

Societies frequently generate public infrastructure and institutional arrangements in order to mediate short-term environmental fluctuations. However, the social and ecological consequences of activities dealing with short-term disturbances may increase the vulnerability of the system to infrequent events or to long-term change in patterns of short-term variability. Exploring this possibility requires the study of long-term, transformational change. The archaeological record provides many examples of long-term change, such as the Hohokam who occupied the Phoenix Basin for over a thousand years and developed a complex irrigation society. In the eleventh and fourteenth centuries, the Hohokam society experienced reductions in complexity and scale possibly associated with regional climatic events. We apply a framework designed to explore robustness in coupled social-ecological systems to the Hohokam Cultural Sequence. Based on this analysis, a stylized formal model is developed to explore the possibility that the success of the Hohokam irrigation system and associated social structure may have increased their vulnerability to rare climactic shocks.

Constitutional theorizing typically employs a bi-level analytical framework wherein the choice of rules precedes the actions that people pursue within those rules. Constitutions are thus products of planning and are prior to the spontaneous ordering that characterizes market processes. This paper explores an alternative conceptual framework wherein rules and actions are coeval and not sequential. Hence, constitutions are subject to spontaneous ordering just as are ordinary market processes. All societies necessarily possess constitutional frameworks that frame the actions of participants; however, those frameworks are not fully settled prior to action but rather evolve through action, which means, in turn, that constitutions, like societies, are living entities and not background precepts against which societal life evolves.

‘Institutions’ do not mean the same thing to Samuelsonian economists as they mean to other people. North's ‘rules of game’, like chess, dominates, even when it is claimed that ‘informal institutions’ are allowed into the tale. The tale is that institutions were once clotted, and then became unclotted, and the Great Enrichment occurred. But the enrichment was by a factor of upwards of a hundred, which cannot be explained by routine movements to an efficient equilibrium. And changes of institutions did not in fact happen much in England. Ethics changed, not laws and procedures. For presently poor countries, too, it will not suffice, as the World Bank and Acemoglu recommend, to add institutions and stir. Economies rely on ethics, which neo-institutionalists, being at heart Samuelsonian, have not wanted to admit. Ideas matter. Indeed, metaphors and stories matter, as in Searle's account.

Definitions are crucial for institutional analysis. This article explains the nature of taxonomic definitions, with particular attention to their use in economics and other social sciences. Taxonomic definitions demarcate one species of entity from another. They are vital for the communication of meaning between scientists, who must share some basic conception of what types of entity they are investigating, to establish a division of labour over subsequent theoretical analysis and empirical investigation of the type of entity defined. Generally, taxonomic definitions build on past usage and are parsimonious: they are not meant to be explanations or descriptions. By contrast, overloaded taxonomic definitions can create square-one disagreement about what is being investigated. As illustrative examples, the paper considers different degrees of progress with attempts to define firms, markets and institutions.

Notwithstanding its major contributions, the ‘Williamsonian’ branch of New Institutional Economics suffers from black holes that recent developments have pinpointed. Rather than taking stock, this paper capitalizes on some of these developments to look ahead. Section 2 provides a reminder of the hard core of transaction cost economics (TCE) with an emphasis on problems that TCE has allowed to identify, particularly the richness of organizational arrangements, an issue that needs further investigation. Section 3 discusses how to better understand the embedment of organizational arrangements in their institutional environment. The concept of ‘meso-institutions’ is introduced as a mean to capture mechanisms providing the needed interface. Section 4 considers another neglected dimension that requires renewed attention: the interactions of organizational arrangements with technologies that partially define their setting. This paper proposes a roadmap to explore this issue, based on an ongoing research developed around the key concept of ‘criticality’. Section 5 concludes.