comprising sets of norms, rules, procedures, and organizational structures
that aid collective action. Depending on their design, institutions
can aid implementation of integration commitments. This can occur
through ensuring that clearly defined commitments are agreed upon
and effectively monitored, so that instances of non-compliance can
be addressed while the propensity for non-compliance reduced either
through reputational effects or material costs. If a state cares about
its reputation as a reliable cooperation partner in the eyes of other
states or in the eyes of a key audience — investors, for instance — it
is less likely to renege on its commitments without good, defensible
reasons. Material costs may be incurred if institutional rules require
compensation to be paid for non-compliance. In this way, institutions
help to shape the behavior of both members and even non-members.
For instance, business actors (non-members of the institution) are
more likely to tailor corporate investment, production and marketing
decisions toward the regional market if they are convinced that
regional integration will be completed. An institutional framework that
enhances the credibility of the integration project can catalyse such
actions. On the other hand, if business actors do not expect regional
integration to be delivered as promised, they are less likely to factor
the regional market into corporate plans.