Institutional complementarity  Institutional complementarity refers to situations of interdependence among institutions. This concept is frequently used to explain the degree of institutional diversity that can be observed across and within socio-economic systems, and its consequences on economic performance. In particular, the concept of institutional complementarity has been used to illustrate why institutions are resistant to change and why introducing new institutions into a system often leads to unintended, sometimes suboptimal, consequences. Approaches, based on the concept of institutional complementarities, have found applications across a wide range of institutional spheres, going from firm governance and industrial relations to varieties of capitalism and political reforms. Formal models have also been developed to study the nature and consequences of institutional complementarity. After a brief description of the canonical formal representation of institutional complementarity, the most relevant domains of applications will be discussed. The concept of institutional complementarity has deep roots in the social sciences. Whereas the sociological approach of the interdependence of different institutions has left the actions of the individuals largely outside the analysis, the modern approach, developed mainly by economists, has been based on the analysis of the constraints facing the actions of the individuals acting in different domains of choice. This approach has found applications across a wide range of institutional spheres, going from firm governance and industrial relations to varieties of capitalism and political reforms. Formal models have also been developed to study the nature and consequences of institutional complementarity. The canonical model of institutional complementarity is due to Masahiko Aoki and relies on the theory of supermodular games developed by Paul Milgrom and John Roberts. The basic structure of the model takes the following form. Consider a setting with two institutional domains, and , and two sets of agents, and that do not directly interact with each other. Nevertheless, an institution implemented in one domain parametrically affects the consequences of the actions taken in the other domain. For instance, can be associated with the type of ownership structure prevailing in a given country and with the structure of labour rights. For simplicity we assume that the technological and natural environment is constant. Suppose that the agents in domain can choose a rule from two alternative options: and ; similarly, agents in domain can choose a rule from either or . For simplicity, let us assume that all agents in each domain have an identical payoff function or defined on binary choice sets of their own, either or , with another sets as the set of parameters. We say that an (endogenous) “rule” is institutionalized in a domain when it is implemented as an equilibrium choice of agents in the relevant domains.