The variant of new institutionalism that is our focus is a pan-disciplinary
theory that asserts that actors pursue their interests by making choices w
ithin institutional constraints. We organize our review of the theory aroun
d its behavioral assumptions, the operation of institutional forms, and pro
cesses of institutional change. At each stage, we give particular attention
to the potential contributions of sociology to the theory. The behavioral
assumptions of the theory amount to bounded rationality and imply transacti
on costs, which, in the absence of institutions, may frustrate collective e
nds. The principle weakness of these behavioral assumptions is a failure to
treat preferences as endogenous. We categorize the institutions that arise
in response to transaction costs as to whether they are public or private
in their source and centralized or decentralized in their making. In detail
ing the resulting categories of institutional forms, we identify key interd
ependencies across the public/private and centralized/decentralized dimensi
ons. The new institutionalism is in particular need of better theory about
private decentralized institutions, and theorists could turn to embeddednes
s theory and cognitive new-institutional theory as a source of help on this
topic. The dominant view of institutional change is that it is evolutionar
y, driven by organizational competition, and framed by individual beliefs a
nd shared understandings. Sociology can refine the change theory by adding
better explanations of the behavior of organizations, and of the processes
by which institutional alternatives come to be viewed as acceptable or unac
ceptable.