The Inherent Logic Of The System Of Innovation And Extension

Institution means a social gable rule, which is one of the key targets studied bythe institution economics. It can eliminate or reduce the uncertainty in the socialcontact process. And with it, human decisions or behaviors can be guided or restricted.Effective institution arrangement is key to the economic development. Essentiallyinstitution innovation is a process with one institution arrangement taking place ofanother. It is potential profit that leads to the institution innovation. So, institutioninnovation is also an activity that innovators or innovation teams try to grab thepotential profit. Potential profit directly leads to institution innovation. While potential profitcomes from scale economy, externality, transaction cost and risk, institutioninnovation is also essentially due to these factors. The institution innovation startsfrom an institution equilibrium, and then to an institution innovation, finally go backto another institution equilibrium. This process sometimes naturally occurs, butsometimes promoted by human being. The demand of institution innovation leads toan induced institution change, while the supply leads to an imposed institution change.Whether induced institution change or imposed institution change is influenced by theoriginal institution, which means there is Path Dependence. Though institution innovation theory originates from property theory andtransaction cost theory, property and transaction cost theory is also an important areaexplained by institution innovation theory. Here the author takes TONGRENTANGfor example to explain that the changing process of property and firm style is also aprocess of institution innovation and change in nature. Finally, the author draws conclusions and points out the limitations andorientation of future research.