Complementarity and institutional change in capitalist systems

Abstract:

The concept of institutional complementarity - that the co-existence of two or more institutions enhances the functioning of each - is frequently used to explain why institutions are resistant to change and why introducing new institutions into a system often fails to achieve the intended objective. This paper utilizes examples from comparative political economy to delineate the concept and address the issue of how to measure the strength of complementarities. It then assesses the utility of the concept for explaining institutional change, concluding that assessing the causal effect of complementarities on change is difficult and ambiguous. A better understanding requires embedding complementarities within a more general theory of institutional change which takes a broader view of the ways in which institutions interconnect and change.