Bringing actors back in: The key take-away from a symposium on crisis and institutional change

By Dr Elodie Douarin, Associate Professor in Economics and Gerhard Schnyder, Professor of International Management & Political Economy, Institute for International Management, Loughborough University London. 

What do hurricane Katrina, a sovereign debt crisis in Greece, military coups, and credit crunches have in common? They all cause crises that may fundamentally challenge established institutional, economic and political orders. While the ‘permacrisis’ our world increasingly seems to be engulfed in is certainly no cause for joy, for social scientists interested in institutions, it offers an opportunity, because crises open up a window to observe the interplay between formal institutions (like laws and regulations) and informal institutions (like social norms and cultural values) and their joint response to stressing factors. It allows us therefore to better understand the relationship between two spheres of human activity that are too often presented as opposed or alternative orders.

To take advantage of that opportunity, in September 2022 the Friday Association for Institutional Studies[1] organised a 2-day online workshop on the theme of “Crisis and Persistence: Dynamics of institutional changes at the interface of formal and informal institutions.” The workshop led us to issue a call for papers for a special symposium in the Journal of Institutional Economics (JOIE), which has now been published. The symposium brings together four papers offering diverse perspectives on institutional resilience and change:

• Arvanitidis and Papagiannitsis (2024) explore the impact of centralised reforms on local water governance in Greece, highlighting the tension between local communities and top-down formalisation. They examine a case study where citizens resist and adapt to changing rules that conflict with customary practices.
• Buchen (2024) uses a coordination game to show that formal institutions, like a legal system, promote resilience during external shocks. The paper contrasts formal institutions (legal context) with informal institutions (observed practices) and their roles in maintaining cooperation.
• Choutagunta et al. (2024) discuss constitutional compliance (CC), which is higher when de jure and de facto rules align. They demonstrate empirically that external shocks, such as civil conflicts and coups, decrease CC, while banking crises and natural disasters have no significant impact.
• Rayamajhee et al. (2024) investigate the impact of Hurricane Katrina on Louisiana’s economic freedom and social capital. They find that the hurricane reduced state involvement in economic affairs but did not affect social capital, suggesting that informal institutions are more resilient to such shocks than formal institutions.

In sum, the papers cover various empirical contexts and institutional concepts, including institutional change, resilience, and compliance.

Our introduction to the symposium, available here in open access, emphasises the difficulties of bringing together these contributions. While they clearly all tackle our original brief and thus investigate the effect of an external shock on an institutional system, the variety of conceptualisation used makes it virtually impossible to compare their findings directly. The plurality of concepts relevant to the study of institutional systems did not come as a surprise to us, given the variety of disciplines that have investigated them, developing distinctive frameworks in relatively siloed literatures. The difficulty of finding an overall frame still turned into a bigger challenge than what we had anticipated. While diverse focal lenses allow for a great variety of contexts and issues to be studied, they do make the broader picture blurry. Nevertheless, a few lessons can be derived.

First, one joint lesson that emerges from the four papers is that, when submitted to an external shock, complementarity between formal and informal institutions is more likely to promote resilience, while antagonism and competition is more likely to lead to change. Second, the diverse lenses used by the papers in the symposium did bring to the fore the distinction between formal institutions that constrain the state and those that serve as a universal legal framework. This distinction is rarely emphasised, but is essential, also because it is one important reason why different framework cannot be compared. Finally (and accordingly), what we also note is that in none of the four papers are the actors of institutional resilience or change very prominent. Indeed, whatever the conceptual lens used, they do not necessarily clarify which actors could resist or induce change.

In our view, a key learning point from the symposium was thus that there is probably much more to learn from focusing on actors caught between formal and informal institutional spheres. Understanding institutional resilience versus change after a crisis involves examining the type of formal-informal interaction, the nature of the crisis, the internal processes triggered, but also the actors involved. An emphasis on actors can bridge concepts such as norms, conventions, laws, and regulations, moving closer to a comprehensive understanding of institutional change and resilience. Recent research has started emphasizing the role of social networks – and hence relationships among actors – in making informal institutions resilient to formal changes. In this context, our symposium suggests that future research may benefit from focusing on actors to explore fruitfully these institutional interactions and to determine which lead to transformative change and which result in resilience or incremental change.

[1] The Friday Association is an informal collective including Luca Andriani from the Birkbeck Centre for Political Economy and Institutional Studies (CPEIS), Elodie Douarin and Randolph Bruno from the Centre for New Economic Transitions (CNET, previously known as the Centre for Comparative Studies of Emerging Economies) at the University College London School of Slavonic and East European Studies (UCL SSEES), and Gerhard Schnyder from the Institute for International Management & Entrepreneurship (IIME) at Loughborough University London.