Since a change from an existing institutional arrangement to a new one is bound to be costly in itself ( in part because the gainers from the change may need to compensate the losers ) , as noted above it is by no mean certain that the less efficient arrangement will actually give way to the more efficient one. However , if the costs of change are smaller than the potential gains , an institutional innovation may be expected . Such a change is an induced institutional innovation . As shown below , although analysis of induced institutional innovations focus on what one might call the demand for institutional change , supply considerations , the subject of section 4 , may also be relevant