When the Rules of the Game Move

Douglass North's famous formulation — that institutions are "the rules of the game in a society" — has shaped how we think about strategy for decades. Firms operate within institutional frameworks: laws, regulations, norms, cultural expectations, and the informal constraints that shape what's possible, profitable, and permissible. Good strategy takes the rules as given and finds the best move within them.

But what happens when the rules themselves are in motion?

This is not a rare condition. In emerging markets, it's the default one. Regulatory frameworks are contested, enforcement is uneven, informal norms carry as much weight as formal law, and the same firm might face fundamentally different rule sets across states, districts, or political cycles. The developed-market assumption — that institutions are stable background conditions against which firms compete — simply doesn't hold.

I've experienced this instability from three very different positions: as a pricing strategist in a specialty chemicals firm navigating commodity-market volatility, as a political strategy researcher studying how organizations compete under shifting electoral rules, and as a researcher on post-disaster economic recovery where the institutional infrastructure itself had been physically destroyed. Each context taught me something different about how organizations actually respond when the rules move.

Three modes of institutional response

Across these contexts, I've observed organizations responding to institutional instability in three broad modes. These aren't formal theory — they're patterns from practice that I think connect to some interesting theoretical questions.

Mode 1: Rule-reading

Some organizations are genuinely skilled at sensing institutional shifts before they fully materialize. They invest in understanding the regulatory and political environment, maintain relationships across institutional boundaries, and build early-warning systems for policy changes.

In the commodity chemicals space, the best-performing firms I worked with weren't the ones with the most sophisticated pricing models. They were the ones that understood how trade policy, environmental regulation, and currency movements interacted — and could adjust pricing frameworks before the impact arrived rather than after. The competitive advantage wasn't analytical sophistication; it was institutional literacy.

In political campaign settings, the equivalent is voter-behavior modeling that incorporates institutional variables — not just demographic preferences, but how changes in electoral rules, redistricting, or alliance structures shift the competitive landscape. The organizations that do this well treat the rule system as an object of analysis, not a fixed constraint.

Mode 2: Rule-shaping

A second set of organizations goes beyond reading rules to actively trying to influence them. This is the domain of lobbying, regulatory capture, standard-setting, and institutional entrepreneurship. In emerging markets, where institutional frameworks are still being consolidated, the opportunities for rule-shaping are particularly large — and the ethical questions particularly acute.

The cold-chain infrastructure project I've been involved with (Agri Nova) is a case in point. India's post-harvest agricultural sector operates under a patchwork of subsidy schemes, priority-sector lending norms, and state-level regulations that are, in many cases, contradictory or poorly enforced. Building a viable venture in this space requires not just navigating those rules but actively engaging with the policy process — contributing to standards, demonstrating model feasibility to development agencies, and helping shape the institutional environment that will determine whether the venture is viable.

This is not corruption. It's institutional entrepreneurship — a concept well-established in organizational theory. But the line between constructive institutional engagement and self-serving regulatory manipulation is genuinely difficult to draw, especially in contexts where institutional capacity is limited and information asymmetries are large.

Mode 3: Rule-making

The most interesting cases are organizations that find themselves operating in genuinely novel institutional terrain — where the rules haven't been written yet. This is the frontier condition: it applies to firms entering unregulated markets, organizations navigating post-crisis institutional vacuums, and entities operating across institutional boundaries where no single rule system applies.

The post-disaster recovery work I contributed to at the Kerala State Planning Board was, in retrospect, a pure example of this condition. After the 2018 floods destroyed significant institutional infrastructure, the recovery effort required not just rebuilding physical assets but reconstructing the institutional frameworks that governed how resources were allocated, who had decision authority, and how competing claims were adjudicated. The organizations that performed best in that context were the ones that could tolerate ambiguity, make decisions with incomplete institutional guidance, and build ad hoc governance structures that were "good enough" to function while permanent institutions were being rebuilt.

What strategy theory misses

Mainstream competitive strategy — Porter, resource-based view, even dynamic capabilities — largely assumes institutional stability. It asks: given a set of industry rules, market structures, and competitive forces, what should a firm do? The institutional strategy literature (Peng, Phan, Kostova, and others) has done important work incorporating institutions into the strategy frame. But even that literature tends to treat institutional differences as relatively stable features of national business systems — things you adapt to, not things that are changing under your feet while you're trying to compete.

What I think is missing is a temporal theory of institutional strategy: how organizations adapt their competitive behavior during periods of institutional transition, not just across different institutional environments. The difference matters. Cross-sectional institutional analysis tells you how firms in China differ from firms in the US because of different institutional contexts. That's valuable. But it doesn't tell you what a firm should do when the institutional context it's operating in is actively changing — which is the condition that most emerging-market firms face, and that an increasing number of developed-market firms face as well (consider the regulatory instability around AI, data privacy, ESG, and trade policy).

The behavioral dimension

This is where behavioral strategy enters the picture. If institutions are shifting, then the cognitive demands on decision-makers are significantly higher than in stable environments. You can't rely on established routines, industry norms, or "the way things are done." You have to actively interpret ambiguous signals, make decisions under genuine uncertainty (not just risk), and update your mental models as institutional conditions evolve.

The behavioral strategy literature — Gavetti, Levinthal, Ocasio, and others — offers tools for thinking about this: attention-based views of the firm, cognitive representations of competitive environments, and the role of analogical reasoning in strategic decision-making. What it hasn't fully addressed is how these cognitive processes interact with institutional instability specifically. When the rules move, what determines whether a decision-maker notices? What determines whether they interpret the movement correctly? And what determines whether their organization can act on that interpretation fast enough to matter?

These are the questions I intend to pursue in my doctoral research at Rutgers. The empirical settings will likely draw from the contexts I know best — emerging-market firms navigating policy transitions, political organizations adapting to competitive rule changes, and commodity-market actors responding to regulatory and trade-policy shifts. The theoretical contribution, I hope, will be at the intersection of institutional theory and behavioral strategy: a better understanding of how organizations think and act when the rules of the game are genuinely unclear.