A wave of structural reform or adjustment programmes (SAPs) was implemented throughout the developing world during the 1990s, inspired by the neoliberal view of how the economy should work. In the perception that institutions guiding economic agents’ behaviour were counter-productive to the ways in which the neoliberal governments envisioned the economy should function, institutions became the target of SAPs. Institutions were earlier defined as rules of action, following Hodgson. The objective of the reforms was to improve the overall efficiency of the economy by changing the rules of production and market exchange that organized it. The focus was on correcting the distortions caused by ‘excessive’ regulation, mainly the state's but also those resulting of social practice. Policies aimed at eliminating, reconfiguring or replacing the old institutions, seen as inefficient, by new ones. It was assumed agents would adapt their behaviour as the government advanced in the reforms.

However, the institutions subject to reform were part of the social structure, in the sense that they organized social life around rather stable patterns or behaviour. The adaptation of agents’ actions was not as direct as initially believed. This chapter coins the term ‘institutional gaps’ to address the phenomenon that occurs in the institutional structure during the period of time until economic agents adapt their behaviour to the reformed or new institutions. Old habits, routines, stable patterns of behaviour and expectations no longer match the reality of an economic structure modified by policy makers. While agents struggle to understand the new institutions, their resources are redundant or underutilized. Although this is often regarded as a short-term problem, it can actually persist for some time and even become permanent.

The depth and speed of the reforms are critical dimensions affecting agents’ adaptation to the reformed structure, as well as their agreement with or resistance to the policies. All in all, institutional change resembles a ‘bricolage process’, the mixing of this and that, of the old and the new. The construction of the new concept of institutional gaps represents an effort to take a meso-level look at the effects of macroeconomic reform, which in turn feeds back on the macro level.