How institutions are shaped and transformed

53 Forum Tahunan Pengembangan Iptek dan Inovasi Nasional V, Tahun 2015

2.3 How institutions are shaped and transformed

The above sections illustrate that NR and NR-based activities have the potential to be a highly productive sector that can lead a country along a path towards development. NR, by default, have the unique characteristics of being public goods.This means that sustainable management requires the strong presence of government and appropriate institutions to shape the behavior of stakeholders. Nowadays institutions are being shaped differently owing to increasing global-local dynamics that correspond with the rapid and frequent knowledge flow among diverse sets of stakeholders. Each stage of industrial development the institutions change. Current globalization of firm activities suggests that such change is not only guided by endogenous change by the firm but increasingly exogenous. The increasing speed and frequency of knowledge exchange has different dynamics to NR-based activities from that of the manufacturing sector due to such knowledge being locally specific and variable. Here it should keep in mind that technological upgrading in NR based activities requires both local specific and frontier technological knowledge. However, how the actors obtain such knowledge depends on absorptive capacity and the strategic choice of firms that are shaped by surrounding institutions. There is a large body of research literature examining institutional change. The literature consists of various approaches each with subtle differences over the ways in which the concept of institutions are defined,as well as attempting to understand the process of change. Moreover, there are several contested notions regarding the understanding of institutional change. One of these relates to the ‘path dependence’ or the self-replicating forces of institutions. Sociological institutionalism DiMaggioand Powell 1998; Berger and Luckmann 1967; Powell 1991 and evolutionary theorists Aoki 2010;Greif and Laitin 2004 consider this historical aspect important in determining the shape of current institutions and assumed that such institutions would try to keep their routines until a moment of disequilibrium. In case of evolutionary theorists, numerous disequilibriums are expected to happen spontaneously and hence, they anticipated change even though they believed in the path-dependent nature of institutions. Other factors also frequently discussed in the literature are related to the patterns of change incrementally or radicallycumulatively or disruptively and the origins of the causes exogenous and endogenous. The collective choice theorists Ostrom1990; Mahoney and Thelen 2010 consider formal rules legal to be the outcome of daily negotiations informal interactions among the stakeholders. They assume that institutional change —the formalization of rules—is the centralized outcome of negotiation among different actors. Essentially, there are contested understandings regarding institutional change. One side considers institutionstry to keep the same routine via path dependence until some kinds of crisis happen to disrupt the routine. Hence the institutions transform in the manner similar to ‘punctuated equilibrium’. In another words, it was considered that without the major crisis, institutions would automatically reproduce itself over the time consolidating the existing trajectory. Others consider that institution cumulatively change through involved actors constantly contesting to establish new rules Knights, 1999, Mahoney and Thelen, 2010 through creating the unspoken consensus Moe, 2005. Thelen 1999 considers that “at critical junctures, old institutions are not necessarily dismantled and replaced but often either recalibrated or functionally reconverted in part or in whol e”. She considers that institutions gradually being reshaped through accommodating new powerful actors or addressing to new imperatives, constantly reconfiguring the actors involved instead of sudden rupture from the past in an abrupt manner. The following section will describe a case of institutional change, at the level of formal law, as a reaction to the sanitary crisis in the salmon industry in Chile in 2008. The reason for 54 Forum Tahunan Pengembangan Iptek dan Inovasi Nasional V, Tahun 2015 looking at this case is to attempt to understand the complex nature of institutional change in managing NR sustainably.The data and information for this case study were collected via numerous interviews with key informants conducted between Nov-Dec 2011 in Chile, as well as secondary sources, such as government reports and industry-specific news media.

3. Institutional Change in the Chilean Salmon Industry as a Reaction to the Sanitary Crisis