Systems Research and Behavioral Science Syst. Res. 22, 483^495 (2005) Published online inWiley InterScience (www.interscience.wiley.com). DOI :10.1002/sres.660 & Research Paper Nested Institutions and the Retardation of the Adaptive Process Sung Chull Kim* Hiroshima Peace Institute, Hiroshima City University, Hiroshima, Japan New institutionalism, constituting a middle-range theory in the social sciences over the past decade, has failed to explain the ways whereby an institutional change takes place. Viewing the world through a lens that targets the institution alone, adherents of the approach focus chiefly on the logic of institutional persistence, that is, embeddedness. A critical analysis of the notion of new institutionalism, from a systems perspective, shows that the embeddedness becomes the very source of institutional change. The established institution, the members of which adhere to the continuity that the institution embodies, cannot escape exposure to complex systemic and environmental changes. That is, the institution, which is nested in a system, cannot but experience a retardation of the adaptive process. The retardation results in institutional change and, furthermore, often precedes a systemic transformation, depending upon the significance of the institution within a given system. Copyright # 2005 John Wiley & Sons, Ltd. Keywords embeddedness; indeterminacy; institutional change; retardation of the adaptive process 1. INTRODUCTION During the last decade, a new attempt to under- stand social phenomena through a consideration of institutional mechanisms characterized the work of many social scientists, just as theories of state had garnered considerable acclaim in the 1970s and 1980s. This latest attempt has been called new institutionalism and distinguishes itself from traditional theoretical frameworks in that it deals with the notion of institution as fundamental. Whereas previous frameworks have emphasized formal, legal or cultural effects of institutions, new institutionalism has repre- sented a focus on the institution itself and, in particular, on informal rules and constraints, which channel the human behaviour (Mayhew, 1989; Eggertsson, 1990; Hodgson, 1993; Peters, 1999). Most theories and methodologies take hold in academic circles as a result of a growing dissatisfaction with previous ones. New institu- tionalism is not an exception to this rule. It emerged as a popular theoretical alternative when rational choice theory, the spearhead of behaviouralism in the social sciences, could not Received 30 August 2002 Revised 22 December 2003 Copyright # 2005 John Wiley & Sons, Ltd. Accepted 8 June 2004 * Correspondence to: Sung Chull Kim, Hiroshima Peace Institute, Hiroshima City University, Otemachi-Heiwa Bldg, 4-1-1 Otemachi, Naka-ku, Hiroshima 730-0051, Japan. E-mail: sckim@peace.hiroshima-cu.ac.jp