In the literature of development, it is recognized that the possibilities for national economic growth are strongly conditioned by prevailing institutional patterns. Exogenous factors, such as international market trends, the supply of foreign investment funds, and terms of trade, define outer constraints on the growth of many less developed countries; but within these boundaries, the realizable growth depends on endogenously set parameters that influence public policy alternatives, the level and direction of domestic capital formation, and the scope and rapidity of structural economic changes. It is in this latter area that the study of institutional performance becomes relevant.
To date, the focus of institutional analysis has been on a variety of social organizations that influence the economic process at one point or another, e.g., trade unions, political parties, financial intermediaries, land tenure systems, and government agencies.