Innovations in Governance

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In this paper we explore the innovations in governance that have promoted investment and growth. Some policy makers have tinkered with their country’s institutions, some have undertaken wholesale changes, and others have attempted to influence the rules in other countries. We survey past attempts at governance innovation, from private governance in India’s industrial cities to cross-border government efforts, such as Singapore’s Suzhou Park outside of Shanghai, from norm-changing mimes in Bogota to rule of law–enforcing anticorruption authorities in Hong Kong. From these recent experiences, we try to extract a few key principles that characterize governance innovations that encourage investment and growth. These include competition, which puts pressure on policy makers to improve institutions; information, which provides necessary knowledge to citizens that can help them push for improved governance; trade in institutions, which allows effective institutions to move across borders; and shifting culture, that is, the jolting of norms to be rule compliant. Finally, we use these principles combined with historical precedent to describe the potential consequences of some recent proposals for governance innovation.