Institutional Designs in International Transactions - An Evolutionary Economics Perspective

Abstract

The globalisation of the economy goes along with numerous kinds of uncertainty and requires adequate institutional designs in order to avoid disadvantageous situations from the actors' points of view. Institutional designs usually consist of a mix of different institutions that are adapted to the particular transaction. Means of public as well as private ordering are applied when institutional designs are developed. In international transactions, institutional gaps might occur. The reason for this is not alone the higher level of uncertainty compared to national transactions. Moreover, public ordering does not work efficiently due to the fact that national states do not play the active role as a frame-setter they used to play in the national context. Supranational institutions are not able to fill this gap. Against this background, the role of the state is to be analysed in the context of how to fill this gap in order to enable international transactions. A research framework based on grounded theory is applied in order to understand the phenomenon of the institutional gap in international transactions. Moreover, evolutionary theory is considered to represent a useful theoretical approach in order to explain how the institutional gap can be filled. Having identified mechanisms of variation, selection, and retention, system dynamic modelling is used in order to structure the respective cause-and-effect mechanisms.

Keywords: Institutional designs, governance designs, public ordering, private ordering, evolutionary theory, system dynamics, system dynamic modelling, international transactions, quasi-rents

JEL Classification: D02, F51, H11, H73, K12, K20, K33, L14