How can institutions lead to stable differences among countries?

In neoinstitutionalism, institutions—defined as formal rules, informal norms, and shared understandings—create stable differences among countries primarily through the mechanism of path dependency.12

Historical institutionalists argue that once a country selects a specific institutional arrangement, it becomes "locked in" to a particular path of development. This occurs because:2

• Investment and Adaptation: Political actors invest resources and adapt their strategies to existing institutions, making those structures durable and resistant to change.1
• Feedback Mechanisms: Once established, institutions are reinforced by positive or negative feedback loops. These mechanisms insulate the system from change, as actors become accustomed to working within defined behavioral limits.3
• Cognitive Constraints: Policy makers often view the world through the lens of their existing institutional framework, ignoring alternative approaches that do not conform to their established norms.3

Consequently, even when countries face similar pressures, their divergent institutional histories lead them to organize social groups and administrative reforms along distinct lines, resulting in stable, long-term institutional differences.2