ABSTRACT
Generally speaking, “institutional change” is change in the institutional structure. An institutional structure consists of a series of institutional arrangements, each of which forms a rule for a set of transactions. Because of the division of labour in the modern economy, any successful innovation activity would have to go through a chain of transactions that connect a series of research and production activities. An innovation activity would fail if it could not get through any single transaction chain. The higher the transaction costs, the harder it is to get through a transaction chain. An institutional structure would be ineffi cient if the effi ciency of any single institutional arrangement were lower than others in that institutional structure.
