The Level of Institutionalization in International Cooperation

1 Introduction Why do some international cooperations have solid structures governing interactions, whereas others are loosely united groups? For example, there are international organizations that have apparatuses for monitoring behavior of participant states, bureaucratic system, and so forth, such as World Trade Organization, while there also exists merely a series of meetings for cooperations, such as Group 7. What conditions determine the level of institutionalization in international cooperation? What accounts for this variance of the level of institutionalization? Theory of international institutions has been ignoring this problem. It concentrates on how to achieve international cooperation. It fails, however, to explain how and why an international institution develops its institutional structure into some level of institutionalization. This paper attempts to explain with a quite simple formal model what determines the level of institution-alization in international cooperation. According to this model, the level of institutionalization is determined through two stages. In the first stage, each prospective participant state selects a favorable level of institu-tionalization, at which it thinks the institution is the most beneficial to it. The favorable level is determined by perceptions of asset specificity of an issue area, opportunistic behavior of other participant states, and behavioral freedom of its own. In the second stage, the prospective participant states having different favorable levels of institutionalization decide one equilibrium level of institutionalization. This phase determines final setup of the international institution. This model indicates the followings. First, the level of institutionalization is in part determined by characteristics of the issue area that will be governed by the institution. The more specific the resources invested into an issue area, the more institutionalized the cooperation becomes. Second, the level of institutionaliza-tion is affected by opportunism of the participant states. The more probability a participant state perceives that other participant states will behave opportunistically, the higher level of institutionalization the state wants. The participant state, on the other hand, also wants to behave freely. Therefore, the state also wants to lessen the institutionalization. Each participant state's favorable level of institutionalization is affected by this trade-off. Third, the final level of institutionalization in an international cooperative framework must be accepted by all participant states. In this collective decision, however, an equilibrium level of institutional-ization is affected by the constellation of power. That is, the favorable level of the most powerful state is the most closest to the equilibrium level of the institution. Its distance varies with …