Summary of JOIE article by Kazuhiro S. Taniguchi, Faculty of Business and Commerce, Keio University, Tokyo. The full article is available on the JOIE website.
This paper examines the core features of Masahiko Aoki’s Comparative Institutional Analysis (CIA) by tracing its methodological foundations and conceptualization of institutions within his intellectual trajectory. Aoki (1938–2015) dedicated his career to developing CIA as a transdisciplinary framework that integrated insights from economics, law, sociology, political science, and cognitive science. His objective was to establish a systemic, transboundary approach to understanding institutions, thereby reconfiguring the field of institutional analysis.
Following Hideshi Itoh’s terminology, this paper presents a synthesis of Aoki’s intellectual system—referred to as Aoki Theory—comprising five foundational components: (1) Comparative Mechanism Design, which compares and selects organizational arrangements; (2) Radical Political Economy, which critiques the limitations of neoclassical economics and stresses historical specificity; (3) Comprehensive Firm Theory, which analyzes firms and corporations as cognitive and associative systems embedded in information and incentive structures; (4) Empirical Comparative and Historical Analysis, which examines institutional diversity across contexts—Japan, China, the U.S., East Asia, and transition economies—especially in corporate governance and economic development, offering policy-relevant insights; and (5) General Institutional Theory, which aims to understand institutions as equilibrium-based, endogenously generated rule systems.
Aoki’s CIA adopts a multilevel analytical architecture. At the macro level, institutions are embedded in co-evolving domains; at the micro level, the cognitive models and strategic actions of actors shape institutional arrangements. Institutions, in this view, are not exogenous constraints but shared beliefs and public representations of common knowledge, sustained through social interaction and stabilized via equilibrium. Institutional change arises from shifts in public discourse, quasi-environmental conditions, cognitive programs, and cultural beliefs.
Although Aoki is widely recognized as a major figure in institutional economics, Claude Ménard and Mary Shirley have noted his relative detachment from the New Institutional Economics (NIE). This divergence stems from Aoki’s distinctive methodological stance. Trained under Kenneth Arrow and Leonid Hurwicz, Aoki employed formal tools from game theory and mechanism design while also drawing on cognitive science and evolutionary psychology to pursue the construction of a general theory of institutions. He engaged in both synchronic and diachronic analyses, extending institutional comparison beyond the Anglo-American context. This approach enabled him to actively participate in policy debates, translating his findings into practical institutional reforms. His distinctive methodology, which is referred to as the three-level approach to institutions, distinguished his work from that of Ronald Coase, Douglass North, and Oliver Williamson—the so-called three giants of NIE.
Unlike the NIE tradition, which tends to treat institutions as exogenous constraints or transaction-cost minimizing devices, CIA reconstructs institutions as endogenously generated and context-sensitive rule systems, co-evolving with actor cognition, belief formation, and interactive dynamics. This originality helps explain Aoki’s partial disengagement from NIE’s mainstream.
Yet, nearly a decade after Aoki’s passing, global transformations—technological, geopolitical, ecological—call for a renewed engagement with CIA. This paper proposes five directions for advancing Aoki’s legacy in light of these challenges.
(1) Situating CIA within a Broader Institutional Landscape
To deepen CIA’s theoretical grounding, it must be more explicitly situated within the wider landscape of institutional thought. While NIE has received much attention, scholars such as Oliver Hart, Geoffrey Hodgson, Richard Nelson, Elinor Ostrom, and Vernon Smith offer alternative frameworks. Avner Greif’s Comparative and Historical Institutional Analysis (CHIA) is particularly relevant, sharing with CIA a focus on endogenous rules and empirical comparison. Future work should explore complementarities and differences between CIA and CHIA to foster greater analytical pluralism in institutional economics.
(2) Re-examining the Theory of the Firm and the Corporation
Aoki theorized the firm as a socially embedded actor operating within institutional games. His transdisciplinary theory of the corporation connected economic coordination with evolving legal and governance architectures. However, recent legal scholarship—such as Jean-Philippe Robé’s distinction between firms as economic units and corporations as legal constructs—suggests the need for further refinement. Building on insights from law, political economy, and organizational theory, CIA should expand its analysis of how legal and economic institutions co-evolve, particularly in relation to ownership, control, and accountability structures, as Simon Deakin insists.
(3) Understanding Institutional Evolution in the Age of Tech Monopolies
Aoki did not witness the full rise of digital platform giants—Alphabet, Amazon, Apple, Meta, and Microsoft. These firms, powered by network effects and data infrastructures, have reshaped market structures and political economies. Their global institutional footprint—especially in AI-driven architectures and platform governance—calls for an updated analytical toolkit. CIA offers conceptual resources to examine these phenomena, but future research must adapt its models to engage with algorithmic decision-making, digital ecosystems, and the institutional implications of technological concentration.
(4) Revisiting Japan’s ‘Three Decades of Transition’
Aoki foresaw Japan’s long institutional transition beginning in the 1990s. However, this process has proven turbulent and incomplete. David Teece recently argued that Japanese firms lack the dynamic capabilities (DC) necessary for innovation and institutional renewal—a critique echoing Aoki’s concerns about Japanese corporate governance. Integrating Teece’s DC with CIA may offer new institutional designs for reform, especially in fostering entrepreneurship and leadership. Moreover, CIA’s policy orientation should now address the development of transboundary capabilities—critical thinking and entrepreneurship—across public, private, and civic sectors.
(5) Reassessing Human Agency in Institutional Evolution
CIA conceptualizes actors as homo ludens—strategic, rule-interpreting agents capable of institutional transformation. Aoki emphasized their ability to use language symbolically, assign meaning, and internalize social norms. However, CIA’s psychological underpinnings remain underexplored. In an era of generative AI, big data, and quantum computing, the assumptions of bounded rationality and opportunism—central to Williamson’s NIE—may no longer suffice. Future research must examine the co-evolution of human cognition and institutions, drawing on insights from cognitive science, moral philosophy, and computational social science to enrich CIA’s behavioral foundations.
In a world confronting grand challenges—climate change, political instability, technological upheaval, and war, revisiting Aoki’s CIA is more than a scholarly exercise—it is a theoretical and policy imperative. Aoki’s vision of institutions as dynamic, co-evolving systems offers critical tools for understanding and shaping complex socio-economic orders. By extending CIA in the five directions outlined above, scholars can build on Aoki’s intellectual legacy to develop a future-ready institutional framework—one capable of navigating the complexities and diversities of 21st-century capitalism.