Conceptualising informal institutions : Drawing on the case of guanxi

Institutions regulate social life through formal rules and sanctions. These are distinguished from another source of social regulation, the informal incentives and constraints inherent in cultural currents and customary practices. Informal practices may be based not simply on cultural forces, though, but expectations regularised by informal rules and sanctions, which may operate as informal institutions. One approach holds that informal institutions arise out of formal institutional voids. Another holds that informal institutions operate in response to situations in which formal institutions frustrate the interests of individuals and groups who engage informal institutions to augment, compromise, or subvert formal institutions. After developing the concept of informal institution, the article goes on to indicate how an informal relationship pervasive in modern China, guanxi, may be understood as an informal institution. It is shown that by drawing on the case of guanxi the scope of the concept informal institution can be extended and also that our understanding of guanxi is enriched when the concept of informal institution is applied to its analysis.