Discovering cooperation: Endogenous change in international organizations

Lenz, Tobias; Ceka, Besir; Hooghe, Liesbet; Marks, Gary; Burilkov, Alexandr Article — Published Version Discovering cooperation: Endogenous change in international organizations The Review of International Organizations Provided in Cooperation with: Springer Nature Suggested Citation: Lenz, Tobias; Ceka, Besir; Hooghe, Liesbet; Marks, Gary; Burilkov, Alexandr (2022) : Discovering cooperation: Endogenous change in international organizations, The Review of International Organizations, ISSN 1559-744X, Springer US, New York, NY, Vol. 18, Iss. 4, pp. 631-666, https://doi.org/10.1007/s11558-022-09482-0 This Version is available at: https://hdl.handle.net/10419/309878 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Vol.:(0123456789) The Review of International Organizations (2023) 18:631–666 https://doi.org/10.1007/s11558-022-09482-0 1 3 Discovering cooperation: Endogenous change ininternational organizations TobiasLenz1 · BesirCeka2· LiesbetHooghe3,4 · GaryMarks3,4 · AlexandrBurilkov1 Accepted: 5 November 2022 / Published online: 14 December 2022 © The Author(s) 2022 Abstract Why do some international organizations (IO) accrete delegated authority over time while in others delegation is static or declines? We hypothesize that the dynamics of delegation are shaped by an IO’s founding contract. IOs rooted in an open-ended contract have the capacity to discover cooperation over time: as new problems arise these IOs can adopt new policies or strengthen collaboration in existing areas. This, in turn, triggers a demand for delegation. However, this logic is mediated by the political regime of the IO. In predominantly democratic IOs, delegation is constrained by politicization which intensifies as an IO’s policy portfolio broadens. These claims are tested using an updated version of the Measure of International Authority dataset covering 41 regional IOs between 1950 and 2019. Controlling for alternative explanations and addressing potential endogeneity across a range of model specifications, we find robust support for our argument. Keywords International organization· Regional organization· Delegation· Institutional design· Politicization· Endogenous change 1 Introduction Why do some international organizations (IO) accrete more delegated authority over time while in others delegation is static or declines? There is remarkable variation in the delegation trajectories of IOs. Some considerably deepen delegation over time; others diminish delegation or their institutional framework barely shifts over decades of cooperation. Consider the sharply diverging delegation trajectories of Mercosur Responsible editor: Axel Dreher. * Tobias Lenz [email protected] Extended author information available on the last page of the article 632 T.Lenz et al. 1 3 and the North American Free Trade Agreement (NAFTA), two regional organizations in the Americas that were founded in the early 1990s to liberalize trade among neighboring states. At their founding, both organizations featured intergovernmental member state bodies tasked with developing cooperative rules in the economic realm. NAFTA’s thirty-year framework was frozen in time until its recent re-negotiation as the United States-Mexico-Canada Agreement (USMCA) which tightened rules of origin but made only minimal changes to delegated institutions (Ciuriak et al., 2020). Mercosur, in contrast, has been considerably more dynamic. After the organization’s founding in 1991 with the Treaty of Asunción, its member states established a dispute settlement system with ad hoc panels in 1993, an administrative secretariat and a Joint Parliamentary Commission in 1995, and an Economic and Social Forum in 1996. In 2003, they upgraded the competences of the secretariat and in 2004 they further institutionalized the dispute settlement system by creating a Permanent Review Tribunal that can issue advisory opinions. Three years later, the members replaced the Joint Parliamentary Commission with the Mercosur Parliament and established another consultative body alongside it, the Forum of Municipalities, Federal States, Provinces, and Departments. Whereas NAFTA has witnessed just one episode of institutional reform that produced marginal shifts in its structure, Mercosur has changed its institutional framework eight times, each time boosting delegation. What explains these contrasting delegation paths? One might ascribe these differences tothe particularities of each organization. What we wish to do, instead, is to develop an explanation that can be generalized across a wide range of IOs, along the lines of Friedman’s (1953: 33) dictum “that there is a way of looking at or interpreting or organizing the evidence that will reveal superficially disconnected and diverse phenomena to be manifestations of a more fundamental and relatively simple structure.” We seek to develop a logic of institutional evolution that focuses on the internal dynamics of an IO. Specifically, we propose a theory of endogenous change in delegation that emphasizes the role of open-ended contracts in facilitating dynamic adaptation.1 We then test implications using an updated version of the Measure of International Authority dataset on delegation to independent agents in 41 regional organizations from 1950 until 2019 (Hooghe etal., 2017, 2019a). The dataset is the most comprehensive and detailed effort to date to gauge cross-sectional and temporal variation in IO delegation, and our update reveals a general upward trend through the mid-2000s followed by some slowdown over the last decade. Scholars agree that “understanding change and development in legal rules, institutions, and procedures […] is a singularly important task” (Abbott & Snidal, 2013: 40), but it has proven easier to explain cross-sectional differences than to explain change. Many scholars share the premise that “international organizations are notoriously resistant to reform and redirection” (Barnett & Finnemore, 2004: 2). After all, institutions are generally understood as humanly devised means to make political behavior more predictable. Historical institutionalists emphasize that institutions 1 This argument builds on Marks etal. (2014). 633 1 3 Discovering cooperation: Endogenous change ininternational… tend to become self-reinforcing, and hence “sticky,” by structuring expectations, providing focal points for investment and generating positive feedback that locks in the status quo (Pierson, 1996, 2004). Rational choice institutionalists also stress the “striking stability and staying power of the institutional status quo,” which is reinforced because IO constitutional reform usually requires unanimity among member states following domestic ratification (Jupille etal., 2013: 5). Moreover, reforming delegation typically has uneven distributional implications, hurting some member states while favoring others (Gruber, 2000; for an overview, see Voeten, 2019: 152–54). Constructivists stress durable norms, rituals and beliefs that resist institutional change since “any efforts at change have to first overcome the power of habitual perceptions, emotions, and practices” (Hopf, 2010: 540; Barnett & Finnemore, 1999; Nelson & Weaver, 2016). Moreover, reform that empowers independent international actors cuts to the heart of national sovereignty. Any reform that diminishes state control must gain the consent of states which are normally considered “jealous guardians of political autonomy and institutional prerogatives” (Tallberg etal., 2013: 7). Domestic politicization of international governance has further tightened constraints on delegating competences to independent IO bodies. As international governance reaches more deeply into domestic politics and restricts the ability of national governments to set policy independently, so governments will pay attention to its electoral consequences (Hooghe etal., 2019b; Walter, 2021; Zürn etal., 2012). In principle, politicization could motivate actors to increase as well as decrease IO authority, but ours are times in which politicization has chiefly mobilized national identity and the defense of national sovereignty against international governance (Börzel & Zürn, 2021; Copelovitch & Pevehouse, 2019; De Vries etal., 2021; Hooghe & Marks, 2009). While there are clear signs that nationalists push back against international organization, we know little about how this might explain either the trajectory of delegation in individual IOs or their cross-sectional variation. Cross-sectional research has made great strides in explaining variation in IO institutional choice and design (Bacciniet al., 2015; Hooghe & Marks, 2015; Jupille et al., 2013; Koremenos et al., 2001; Koremenos, 2016; Johnson & Urpeleinen, 2014; Mansfield & Milner, 2012; for an overview, see Voeten, 2019). We seek to extend this work by focusing on the temporal forces that underpin institutional evolution. Hence we contribute to a small, but growing, body of research that uses panel data to model how discrete moments of institutional reform aggregate into cumulative paths of institutional change.2 Our explanation shares with historical institutionalism a focus on the temporal dynamics of institutional evolution, and in this, we contribute to a burgeoning literature in international relations (Alter, 2016; Büthe, 2016; Fioretos, 2011; Hanrieder, 2015; Pierson, 1996). In line with historical institutionalism we argue that early institutional choice—in our case, the choice for an open-ended contract—conditions later decisions (Mahoney & Thelen, 2010; Streeck & Thelen, 2005). Institutional 2 Comparativists have also noted that “the vast literature that has accumulated provides us with precious little guidance in making sense of processes of institutional change” (Mahoney & Thelen, 2010: 2). 634 T.Lenz et al. 1 3 choice at an IO’s founding appears to set that IO on a distinctive path of authoritative evolution, conditioning the extent to which temporal dynamics engrain institutional stability. Whereas much of the historical institutionalist literature suggests that institutions become more deeply embedded over time, thus hampering institutional change, we show that open-ended contracts enable institutional evolution. Thus, we identify an institutional property that undermines the forces of path dependency that historical institutionalists tend to highlight. Perhaps the most cited IR theory that focuses on the evolutionary dynamics of IO institutions is neofunctionalism. Developed and refined in the 1950s and 1960s by Haas and Schmitter, neofunctionalism emphasizes the endogenous dynamics of cooperation by positing a series of spillover mechanisms (Haas, 1958; Schmitter, 1970; Stone Sweet & Sandholtz, 1997). We build on the neofunctionalist idea of policy spillover as a spur to deeper delegation in two ways. We specify a starting condition – open-ended contracts – that enables policy spillover to be triggered, and hence makes this mechanism endogenous to an IO’s development path. And we identify a key scope condition – politicization – that constrains a functional logic of delegation. We thereby begin to address earlier criticism that neofunctionalism failed to specify “the conditions under which spillover can be expected to operate” (Keohane & Hoffmann, 1991: 20). A theory of endogenous change is complementary with theories that emphasize exogenous change in an IO’s environment (Caporaso, 2007). Our premise is that alongside the effects of the environment, one can identify a logic of endogenous change that unfolds within an IO. Our argument is that open-ended founding contracts – those that do not stipulate a specific end goal of cooperation – enable the discovery of cooperation by allowing states to engage new policy areas or deepen cooperation in existing ones, and such policy expansion generates functional pressures for delegation. Whereas an open-ended contract enables an expansive logic of delegation, a closed-ended contract, which delineates the end goal of cooperation in precise terms, is intended to hamper policy expansion. However, even for IOs with an open-ended contract this expansive logic may not continue indefinitely. Once IO authority is perceived as domestically costly, political entrepreneurs may mobilize discontent against international governance (De Vries etal., 2021). They are likely to do so most effectively in IOs composed primarily of democratic regimes. Hence when domestic politicization hits a democratic international organization that reaches deep into domestic politics, we are likely to see a dampening of the endogenous dynamic. We test this thesis on a sample of 41 regional IOs across the major world regions: the Americas, the Asia–Pacific, Europe, the Middle East, and Africa. Limiting the sample to authoritative regional IOs has some distinct virtues. A focus on regional, as opposed to a mix of regional and global IOs, provides a more stringent empirical test for our argument because it increases unit homogeneity, yet extends the range of alternative theories that we can consider (Sekhon, 2008: 276). With more homogenous units the unobserved biases needed to explain away a given effect tend to be larger than for a sample of widely heterogenous units (Rosenbaum, 2005). Sampling regional IOs allows us to test the effect of alternative explanations that cannot be imposed on the global level (e.g. trade interdependence) or do not vary much across 635 1 3 Discovering cooperation: Endogenous change ininternational… global IOs (e.g. the size of IO membership, the democratic character of its member states, or asymmetry of power). Moreover, several variables of interest that exhibit only cross-temporal variation in global IOs, vary both over time and cross-sectionally in regional IOs. The paper proceeds in three parts. The next section conceptualizes and measures IO delegation and describes the main empirical pattern: an uneven trend towards increasing delegation since 1950 which flattens in the 2010s. We then specify our expectations concerning endogenous change and its major alternatives. The final sections of the paper evaluate the validity of these expectations in fixed effects models. 2 Changing delegation ininternational organizations, 1950–2019 Our conceptualization and operationalization of delegation follows the Measure of International Authority (MIA) (Hooghe etal., 2017, 2019a), and we extend the time series from 2010 to 2019. Here we summarize the chief moves that inform the measurement. In line with convention, a regional IO is defined as an international organization composed of three or more geographically proximate states having a continuous institutional framework (Haftel, 2013; Powers & Goertz, 2011). The MIA dataset draws on the Correlates of War dataset to identify organizations that have a distinct physical location or website, a formal structure (i.e. a legislative body, executive, and administration), at least 30 permanent staff,3 a written constitution or convention, and a decision body that meets at least once a year. Forty-one IOs are regional in our definition, including two that no longer exist, COMECON and the first East African Community. The sample, listed in Online Appendix A,4 covers most states and continents, and includes all regional IOs that “have standing in international politics” (Hooghe etal., 2019a: 30). 2.1 Conceptualization andmeasurement Delegation is conventionally defined as “a conditional grant of authority from a principal to an agent that empowers the latter to act on behalf of the former” (Hawkins et al., 2006: 7, italics in original; Hooghe & Marks, 2015). States delegate authority to an IO when they empower a third party to fill in or adjudicate the details of an incomplete contract, provide expert information, select or prioritize tabled proposals, and at the authoritative high-end, propose policy initiatives, make binding decisions, or sanction contract violations (Abbott & Snidal, 1998; Bradley & Kelley, 2008; Johnson, 2013; Pollack, 2003). The principals, in this case the member states, delegate to benefit from the expertise, time and resources that agents may offer in 3 Yearbook of International Organizations, multiple years. 4 The Online Appendix is available on the Review of International Organizations’ webpage. 636 T.Lenz et al. 1 3 managing policy externalities, facilitate decision-making, enhance credibility or create policy bias (Hawkins etal., 2006: 13–20). Principals retain ultimate control because they have the right to revoke delegated competences, but delegated agents enjoy a degree of autonomy, which can, and often does, change over time. Change in delegation can have profound consequences. For one, since delegation poses a constraint on national sovereignty, delegating further competences to independent agents confronts principals with the strategic problem that these agents may shirk (see Lake, 2007), and this may compound the sovereignty dilution that international delegation always entails (Hawkins et al., 2006). Moreover, deeper delegation alters both the process and the outcomes of international cooperation: it has been shown to be associated with more productive decision making (Sommerer etal., 2022), more robust goal attainment (Gray, 2018), and a lower probability of IO death (Debre & Dijkstra, 2021). This conceptualization of delegation is consistent with the classical IO design literature. Abbott and Snidal define delegation as “the ability to act with a degree of autonomy, and often with neutrality, in defined spheres” (Abbott & Snidal, 1998: 9). Barnett and Finnemore (2004) similarly view IOs as autonomous entities that enjoy some independence from member state control embodied, in particular, in independent international bureaucracies. Delegation features also prominently in the rational design project (Koremenos etal., 2001). And Haftel and Thompson (2006: 255) operationalize delegation—in their terms, IO independence—with a focus on bureaucracies and dispute settlement. Delegation is related to, but distinct from, other concepts that have been used to describe the design of IOs. Especially familiar to students of regional cooperation is the distinction between intergovernmental and supranational. Whereas the former denotes IOs that are fully controlled by member states, the latter captures the capacity of “constraining the behavior of all actors, including the member states, within [specific] domains” (Stone Sweet & Sandholtz, 1997: 303; see also Helfer & Slaughter, 1997). This is akin to Boehmer etal.’s (2004: 5) concept of institutionalized IOs, which are characterized by “an ability to alter state behavior.” Both concepts are related to autonomy, defined as an “ability to operate in a manner that is insulated from the influence of other political actors—especially states” (Haftel & Thompson, 2006: 256). All these concepts share with delegation that they capture the independence of IOs from member state control. Yet, delegation is conceptually more specific because it emphasizes independence stemming from the empowerment of specific institutional actors that are given the conditional authority to perform functions on behalf of states. Therefore, delegation is often conceptualized as one of several elements of a broader characterization of IO design, such as an element of IO independence alongside autonomy and neutrality (Haftel & Thompson, 2006), or an element of legalization alongside precision and obligation (Abbott etal., 2000). Delegation, in our view, has the distinct virtue of allowing researchers to compare “completely dissimilar acts of delegation” (Brown, 2010: 144) across different domains, such as the national and the international, or different types of IOs. The MIA operationalization that we adopt makes three moves (Hooghe et al., 2017: 107–13). First, delegation is broken down into two spheres: delegation of authoritative competences in the sphere of political decision making, and delegation 637 1 3 Discovering cooperation: Endogenous change ininternational… in the sphere of legal adjudication. Next, each organized IO body is identified, and its composition examined for its degree of independence from member state control. And finally, each body’s role in IO decision making is evaluated. The measure considers four types of bodies in the political sphere – IO secretariats, assemblies, executives, and consultative bodies –, and one type of body in the legal sphere – dispute settlement bodies. Organized bodies are considered independent, or non-state, when the members are primarily or wholly selected by national parliaments, regional or local governments, trade unions or business associations, or other interest groups; or when member state representation is indirect, that is, representatives are formally prohibited from receiving voting instructions from their government, or their members take an oath of independence. For each of the political bodies, its competences are assessed in setting the agenda and in making the final decision across six decision areas: the accession of new members, the suspension of members, constitutional reform, budgetary allocation, financial compliance, and up to five streams of policy making. Third-party dispute settlement breaks down into seven indicators that are conceived to jointly capture the authority of an IO’s legal dispute settlement. Four of these evaluate the extent of state control and three evaluate whether dispute settlement is supranational. All assessments are made for each year of an IO’s lifetime. All components are summed up into scales that range from 0 to 1, where 0 stands for pure intergovernmentalism and 1 for pure supranationalism, and these are then averaged to generate an annual delegation score for each IO (see Online Appendix B for more details). The focus throughout is on formal rules that can be observed in treaties, constitutions, conventions, special statutes, protocols, and rules of procedure. The main advantage of examining formal rules is that they can be specified independently of behavior. Moreover, although states can exert influence through informal as well as formal channels, examining formal rules presents a hard case for detecting institutional change. Formal agreements impose real costs on states, are explicit and public, and are harder to change or elide because they are embedded in legal documents (Johnson, 2013). If formal international authority mattered only marginally or not at all, then one would not expect to find systematic, intelligible variation. Nor would one expect states to negotiate intensely about their content (Koremenos, 2005). Nevertheless, we do not engage institutions that exist only on paper. We investigate the formal rules and then determine whether these are translated into operating institutions to narrow the gap in coding between unrealized intention and actual practice. In other words, there needs to be evidence that institutions are indeed set up and could, at least potentially, be used. 2.2 Empirical patterns The most striking pattern that emerges from the data is that delegation has increased significantly over the 70years covered in our dataset, with a rapid rise after the end of the Cold War and a slowdown over the last decade. Figure1 shows this increase. The dashed line depicts the evolution of delegation in a continuous sample of 20 organizations from 1975 to 2019. The average 638 T.Lenz et al. 1 3 delegation score more than doubled from 0.14 to 0.29. This is equivalent to adding a general secretariat with executive functions that has an exclusive right to set the policy agenda and a non-exclusive right to initiative in an additional two decision areas. The trend is less marked, but nevertheless visible, for the whole sample of IOs, because new organizations tend to start at lower levels of delegation. This upward trend envelops all but a few organizations in our dataset. However, we detect wide variation: the standard deviation is 0.15. We observe 22year-to-year declines in delegation (of a total of 1888year-to-year observations), and two organizations – the Economic Community of Central African States (ECCAS) and the European Centre for Nuclear Research (CERN) – experience an overall decline over the observation period. Figure2 summarizes the amount of change in delegation across the IOs in our sample during each IO’s lifetime. The single blue dots identify the six organizations that have been static according to our measure. Next up are four IOs that shift less than 0.02 on the 0–1 delegation scale. All other IOs have been more dynamic, and six IOs arrayed at the top of Fig.2 have increased delegation by more than 0.33 on the 0–1 scale – i.e. by more than two standard deviations from the mean. Fig. 1 Temporal evolution of average delegation in a continuous sample from 1975 to 2019 and the full sample. Note: The full sample contains 41 regional IOs and the continuous sample contains 20 regional IOs from 1975 to 2019 .05 .1 .15 .2 .25 .3 Delegation 1950 1960 1970 1980 1990 2000 2010 2020 Year Full sample Continuous sample 1975−2019 645 1 3 Discovering cooperation: Endogenous change ininternational… H3 (scope condition): The expansive logic of delegation is dampened by politicization in democratically dominated IOs. 4 Determinants ofchange ininternational organizations: Amultivariate analysis We test our expectations on endogenous change in multivariate analysis. We begin by describing relevant variables and model choices. 4.1 Operationalization Our theory posits four key variables: the nature of an IO’s contract, policy scope, politicization, and democratic IO.6 Contract is operationalized by assessing whether an IO’s foundational contract formulates its objectives, i.e. future commitments, in specific or open-ended terms.7 We code a contract as closed-ended (value = 0) if its purpose is to achieve a fixed purpose of interstate cooperation under clearly specified conditions. For example, the objectives of the European Space Agency (ESA) are precisely formulated as follows: “for exclusively peaceful purposes, cooperation among European states in space research and technology and their space applications” (ESA, 1975: article 2). A contract is open-ended (value = 1) if its purpose is to achieve broad-ranging cooperation that is only vaguely specified, for example, as a “community of peoples,” “political federation,” or in terms of “unity” or a “common identity.” The bestknown example is the European Union with its diffuse and open-ended commitment to an “ever closer union among the peoples of Europe” (EU, 1957: preamble). The Caribbean Community’s 1973 Treaty is another example of an open-ended contract calling for economic cooperation as a step to “fulfil the hopes and aspirations of their peoples for full employment and improved standards of work and living” (CARICOM, 1973: article 4). While the treaty focuses on economic cooperation, it commits member states to “take all appropriate measures” for “the achievement of a greater measure of economic independence and effectiveness of its Member States” (Articles 4 & 5). In the absence of an existing measure, we developed the coding scheme ourselves and tested its reliability with independent coders who produced convergent scores. Table1 below shows the distribution of IOs by type of contract in their first and last year in the time series. While an organization can change its contract over time, this is rare. Three IOs—Benelux, CARICOM, and IGAD—shift from closedto open-ended contracts. Results hold if we use the original or revised contracts. 6 Online Appendix C provides more detail on the operationalization of all variables. 7 The theoretical literature sometimes treats contractual incompleteness as a continuous phenomenon but in the absence of prior measures, we opt for a binary operationalization. A recent example of measuring the precision of treaty substance in continuous terms is Gastinger and Schmidtke (2022). 646 T.Lenz et al. 1 3 Policy Scope is estimated as the number of policies in whichan IO is engaged in a given year across a list of twenty-five policies (Hooghe etal.,2017, 2019a). Our expectation is that a change in Policy Scope leaves a material footprint in the budget, a legal document (a protocol, an annex, a convention), or in the creation, expansion, or elimination of an institution (e.g. a commission, a working group, a directorate, a crisis management mechanism, or a high-profile position). We use eight legal, financial, and organizational indicators to assess whether there is tangible evidence that an IO’s portfolio encompasses a particular policy. Politicization estimates the salience and divisiveness of debate over an IO. Media coverage of protests directed at an IO is an accessible and plausible indicator for contestation about an IO (Beyeler & Kriesi, 2005; Tarrow, 2005). We implement an algorithm developed by Tallberg etal. (2014) for annual media coverage of protests/demonstrations directed at an IO in the LexisNexis database. Politicization is calculated as a three-year moving average of the number of mentions (log10) that combine the word protestor or demonstrator with the IO name.8 We construct a binary measure of democratic IO by using the Varieties of Democracy (V-dem) estimates for each member state of an IO(Coppedge etal.,n.d.) to calculate the average democratic quality of an IO. We follow the recommendation of V-Dem in using 0.5 as the cut-off point (Lührmann etal., 2018), hence an IO is coded as democratic if the average V-Dem democracy score for its members in any given year is higher than 0.5. In robustness analyses, we also use the continuous V-Dem measure of democracy. Contending explanations Our argument differs from arguments that link IO change to factors that can be plausibly conceived as exogenous. Here we evaluate three contenders: power asymmetry, foreign policy heterogeneity, and trade interdependence. Some argue that large power asymmetry may put downward pressure on IO delegation because hegemonic actors reject constraints on their national sovereignty (Gruber, 2000; Lipscy, 2017; Stone, 2011). As Abbott and Snidal (2000: 448) note, “forms of legalization that involve limited delegation […] provide the crucial basis for cooperation between the weak and the strong.” Others contend that large power asymmetries may facilitate building stronger independent institutions, because hegemonic states are more willing to provide public goods as they need not worry about an unfavorable distribution of institutional benefits (Kindleberger, 1973; Table 1 IOs by contract N = 41 IOs over 1950–2019 (or last year in dataset) First year Last year Closed-ended 16 13 Open-ended 25 28 8 The measure is quite strongly correlated with an estimate of the salience of an IO derived from a count of references to the IO in Google (r = 0.75). 647 1 3 Discovering cooperation: Endogenous change ininternational… Martin, 1992; Mattli, 1999). Power asymmetry is the ratio of the material capabilities of the most powerful member state to the sum of all other members. The measure combines total population, total Gross Domestic Product (GDP) and military expenditure.9 Preference divergence is likely to make states less inclined to cede authority to non-state bodies because their institutional ideal points are likely to be further apart and the fear that independent institutions are used to work against a member state’s preferences is larger (Keohane, 1984). We operationalize this liberal line of argumentation in two ways. First, we evaluate how foreign policy congruence/incongruence among the member states of an IO affects their willingness to delegate (Voeten, 2021). Preference Heterogeneity uses data gathered by Bailey etal. (2017) who estimate country-year ideal points that reflect the extent to which two states vote differently in the UN Assembly for the period 1946–2019. Finally, we evaluate how congruence on economic interests among an IO’s member states affects their willingness to delegate. Trade interdependence is a proxy for congruent economic interests since trading partners could be expected to have a convergent interest in deepening trade rules (Haftel, 2013; Martin, 1992; Mattli, 1999). Our preferred measure is Intra‐regional trade, which captures a region’s total trade as a proportion of member countries’ total trade, though we also report two alternative operationalizations. Controls We control for the size of an IO’s membership on the premise that “centralization of information is […] increasingly valuable with larger numbers” (Koremenos etal., 2001: 789). Members is the natural log of the number of member states in a given IO-year. Second, we control for the political regime of an IO’s members on the expectation that an IO with democratic member states will be less fearful of exploitation (Mansfield etal., 2002, 2008; Simmons, 2009; Tallberg etal., 2016). Democracy draws on Varieties of Democracy estimates (Coppedge et al., n.d.) to calculate the annual average democracyscore for an IO. Third, we control for GDP-per-capita on the premise that more affluent states transact more across borders and may have greater demand for international cooperation. A fourth control is GDP dispersion, the standard deviation in GDP per capita among members, on the expectation that the more economically heterogeneous the member states of an IO, the greater the benefit of empowering the IO to mediate conflicts (Carnegie, 2014; Koremenos etal., 2001: 785–86). Finally, Cold War is a dummy with value of zero from 1991 on the ground that the dissolution of two-power hegemony created new demands for regional cooperation. Tables including descriptive statistics and bivariate correlations among the variables can be found in Online Appendix D. 9 This operationalization amends and updates the CINC series in the COW dataset (Singer, 1988), which ends in 2012. Robustness checks that use the original CINC measure (up to 2012) produce consistent results. 648 T.Lenz et al. 1 3 4.2 Estimation strategy A theory of endogenous institutional change entails a two-step estimation strategy whereby an institutional property triggers a causal mechanism (step 1) that affects institutional development (step 2). In our test, we first investigate whether an open-ended contract leads to policy expansion in a regional organization over time (H1). We then test whether policy expansion drives change in delegation (H2) and whether politicization acts as a brake on delegation in democratic IOs once policy scope expands (H3). We test our argumentusing time-series cross-sectional data. The analysis faces a number of inferential threats (e.g. longitudinal and group-wise heteroskedasticity and correlation of standard errors) which complicate the selection of appropriate estimators (Beck & Katz, 2011). Since our main goal is to examine change over time, we use fixed effects models. This allows us to estimate change in the levels of policy scope and delegation within IOs over time while accounting for IO-specific factors that are time invariant. All of our models use one-year lagged independent variables and, to control for factors changing every year or specific to a certain period in an IO’s existence, we include either a year count or the age of the IOs and a Cold War dummy. Finally, to address autocorrelation we also conduct analyses with a lagged dependent variable. A theory of endogenous change posits a causal sequence in which variables build on each other, but a statistical test requires that at least one variable is treated as exogenous. We theorize the IO’s founding contract as the starting condition of an endogenous process. We measure Contract at an IO’s founding moment, with considerable temporal distance (between 1 and 82years) to the institutional change that we seek to account for. Change in the contractual nature of IOs is rare (three out of 41 regional IOs display it) and we run all our analyses also without these organizations. Yet, sceptics may contend that even contract, though temporally distant from the outcome of interest, may be endogenous to the evolutionary institutional dynamics we observe because policy makers may intend an IO to evolve over time and, therefore, design an open-ended contract. We address this concern about potential endogeneity between contract and policy scope through an instrumental variable approach, using a measure of historical ties – the extent to which an IO’s founding members have a shared past of colonialism or prior statehood – that is temporally even more distant to our outcome variable and clearly exogenous to the decision to establish an IO, or to write an openor closed-ended contract. As we show, Historical ties is a strong instrument that meets the exclusion restriction. 4.3 Results We start our analysis by taking a descriptive look at the trajectories in delegation of different types of IOs. Our core claim is that IOs with an open-ended founding contract are more likely to display an expansive path of delegation than are those that rest on a closed-ended contract, and that this logic operates via the differential growth of an IO’s policy portfolio. 649 1 3 Discovering cooperation: Endogenous change ininternational… Figure4 shows how these two types of IOs differ with regard to the average change in policy scope (4a) and in delegation (4b), measured as the difference in the respective values between the last and the first year in the dataset. The divergence between open-ended and closed-ended contracts is striking. IOs that were set up with a closed contract gained, on average, 3.1 policies on a 25-point scale over the course of their lifetime, while those with an open-ended contract increased their policy scope, on average, by 8.1 policies. The pattern is similar for delegation: an average increase of 0.07 for IOs with closed-ended contracts against 0.21 for IOs with an open-ended contract on a 0–1 scale. These differences are substantively important and highly statistically significant under controls in a cross-sectional analysis.10 These patterns suggest that IOs with open-ended contracts display a much higher dynamic in delegation than IOs with a closed-ended contract, lending initial support to our core claim. A more rigorous test needs to employ the full temporal variation that our data affords. We start by investigating whether open-ended contracting leads to policy expansion in regional organizations over time (H1). Table2 presents the results of fixed effects models with policy scope as the dependent variable using various specifications. We theorize that an open-ended contract creates the flexibility for an IO, over time, to learn how to adapt its policies to changing needs. Hence, this opens the door for policy spillover. In contrast, a closed contract constrains that flexibility. The key point is that time matters differently for IOs with different types of contracts. Thus, it makes sense to model contract dynamically so we can observe separately the effect of time and the theorized accelerator effect of an open-ended contract. We do this by interacting the type of contract with the age of an IO.11 The first two columns of Table 2 show a baseline model with only the key variables of interest (model 1) and an extended baseline model with fewer controls (model 2). Model 3 is our main model. Regardless of which controls we use, the main results 3.12 8.11 0 2 4 6 8 10 Mean policy scope change Closed−ended contract Open−ended contract 0.07 0.21 0 .1 .2 .3 Mean delegation score change Closed−ended contract Open−ended contract (a) (b) Fig. 4 Mean change in policy scope (a)and delegation (b)based on type of contract, 2019 (or last year in thedataset) - year of founding 10 In the cross-sectional analysis (not shown here) we use average scores for the covariates in Table2 for each IO (a) in 1950, or the year of their establishment, until 2019 (b). 11 Time is modelled here as year-creation + 1 (whereby creation is the date of creation or 1950, whichever is later). Even IOs that survived WWII had to be rebooted to resume cooperation. 650 T.Lenz et al. 1 3 Table 2 Explaining change in policy scope (time-seriescross-sectional analysis with fixedeffects) (1) (2) (3) (4) (5) (6) (7) VARIABLES Baseline Extended baseline Main model With trade intensity With trade introversion With CINC Excluding Benelux, Caricom, IGAD Contract t-1 1.646 1.448 1.237 1.427 1.405 1.560 (1.097) (1.092) (1.149) (1.208) (1.173) (1.185) Age t-1 0.039*** 0.043*** 0.002 0.006 0.007 -0.008 -0.018 (0.010) (0.010) (0.047) (0.047) (0.045) (0.049) (0.050) Contract t-1 * Age t-1 0.140*** 0.145*** 0.136*** 0.133*** 0.133*** 0.133*** 0.152*** (0.033) (0.034) (0.032) (0.033) (0.033) (0.036) (0.031) Members t-1 1.944 1.637 1.621 1.819 2.276 (2.187) (2.297) (2.312) (2.237) (2.477) Democracy t-1 7.288 6.831 6.798 7.271 7.401 (6.417) (6.224) (6.087) (6.923) (6.768) GDP per capita t-1 -0.459 -0.497 -0.509 -0.278 -0.029 (0.958) (0.955) (0.944) (0.994) (0.965) GDP dispersion t-1 0.329 0.392 0.387 0.214 0.170 (0.492) (0.503) (0.542) (0.516) (0.542) Power asymmetry t-1 -0.223 -0.452** -0.437** -0.440** -0.221 -0.483* (0.158) (0.221) (0.208) (0.208) (0.226) (0.243) Trade interdependence t-1 -0.026 -0.054 -0.001 -0.124 -0.052 -0.082 (0.083) (0.073) (0.003) (2.223) (0.074) (0.069) Cold War t-1 -0.839* -0.821* -0.835 -0.860 -1.169** (0.495) (0.485) (0.527) (0.534) (0.505) 651 1 3 Discovering cooperation: Endogenous change ininternational… Table 2 (continued) (1) (2) (3) (4) (5) (6) (7) VARIABLES Baseline Extended baseline Main model With trade intensity With trade introversion With CINC Excluding Benelux, Caricom, IGAD Preference heterogeneity t-1 -0.770 -1.023 -0.769 -0.802 -0.503 -1.161 (1.016) (1.130) (1.081) (1.041) (1.051) (1.190) Constant 4.781*** 6.605*** 2.387 1.624 1.761 1.676 3.937 (0.451) (2.425) (5.385) (5.110) (5.346) (5.386) (6.535) Observations 1887 1715 1708 1708 1708 1591 1564 R-squared 0.541 0.522 0.558 0.554 0.554 0.527 0.566 Number of IOs 41 41 41 41 41 41 38 Robust standard errors in parentheses; GDP per capita and GDP dispersion are standardized for easier interpretation. *** p < 0.01, ** p < 0.05, * p < 0.1 652 T.Lenz et al. 1 3 are remarkably consistent – the interaction term has the correct positive sign and is statistically significant, suggesting that open-ended contracts enable IOs to discover cooperation over time while closed-ended contracts do not. To better visualize the interaction effect, Fig.5 shows predictive margins for openand closed-ended contracts for various levels of IO age.12 The results strongly support H1. None of the controls, except for Power asymmetry and Cold War, reach conventional levels of statistical significance. As expected, IOs characterized by higher power asymmetries among their members have experienced less policy increase. The end of the Cold War seems to have facilitated policy expansion, although this finding is not consistently significant across model specifications. The main results appear robust across various specifications. Specifically, we employ alternative measures of trade such as trade intensity and trade introversion (models 4 and 5), the standard CINC measure for power asymmetry (model 6), and we exclude from the analysis the three IOs that experienced a contract change (model 7). In addition, we ran the main analysis using random effects and with a lagged dependent variable (see Online Appendix, TableF1).13 The substantive interpretation of our findings is the same.14 In short, there is considerable evidence that open-ended contracts lead to policy expansion over time. Fig. 5 Effect of Contract on Policy scope at various age of the IO 0 5 10 15 20 Effect on Policy scope 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Age Closed−ended contract Open−ended contract Note: Adjusted predictions with 95% CIs 12 This figure is constructed using the results from model 3. 13 The random effects model gives the average of the between and within results, so it also captures the cross-sectional variation in our data. Hausman tests show that model fit is significantly better with fixed effects than random effects. 14 In additional cross-sectional tests, not shown here, we confirm that the exogenous variables cannot account for the nature of an IO’s founding contract, which allows us to exclude the possibility that they exert causal effects through contract. 653 1 3 Discovering cooperation: Endogenous change ininternational… What if policy makers design contracts at founding with the intention to enable or restrict policy scope expansion over time? We address the potential endogeneity of contract by instrumenting contract with a variable that is clearly exogenous to both the choice of IO contract and policy scope. Historical ties captures whether the founding members of an IO have a shared political past of colonialism or prior statehood (e.g. as a federation). Historical ties reflect bonds that were forged prior to the design of the IO, so there is no doubt that it is exogenous to the decision to create an IO, or to write an openor closedended contract. Moreover, as we detail in Online Appendix E, Historical ties is a strong instrument in that member states that have historical ties are more likely to sign open-ended contracts (relevance of the instrument). At the same time, we leverage the three IOs that witness a change in their founding contracts to suggest that historical ties affect policy expansion only through contract and not through other types of interactions, such as trade or migration that could influence policy scope directly, therefore fulfilling the assumption of the exclusion restriction. A two-stage fixed effects model, presented in Online Appendix E (Table E1), tests our conjecture. In the first stage, Historical ties is a statistically strong predictor of Contract. According to the Stock-Yogo test, we can reject the null hypothesis of weak instrumentation at the strictest threshold of 10 percent. In the second stage, instrumented Contract is significantly associated with change in policy scope. Twostage estimation is almost always less efficient than ordinary least squares estimation (Bartels, 1991), but here there is no loss of statistical power. In the second step of our analysis, we test whether the expansion of an IO’s policy portfolio drives increases in delegation (H2) and whether politicization puts a brake on this process among democratically dominated IOs (H3). Since we expect politicization to put downward pressure on further delegation to the extent that an IO’s policy portfolio expands, we use a three-way interaction between politicization, policy scope, and a dummy variable for whether an IO is predominantly democratic.15 Table3 presents fixed-effects regression results with Delegation as the dependent variable. As with policy scope in Table2, we also report results using trade intensity and trade introversion (models 4 and 5), the CINC measure for power asymmetry (model 6), and we exclude from the analysis the three IOs that experienced a contract change (model 7). Figure6 plots the average marginal effects of a one unit change in policy scope over various levels of politicization, and we plot the interaction separately for non-democratic and democratic IOs.16 Table3 and Fig.6 support H2 and H3. Specifically, increased policy scope leads to more delegation (H2) as can be seen by the positive and highly statistically significant coefficient for Policy scope in Table3. However, and in line with H3, politicization dampens delegation in an IO with democratic member states. A three-way interaction finds that athigher levels of politicization (exceeding 1.5) the effect of 15 The results of three-way interactions are simpler to interpret if at least one of the variables is dichotomous. However, as a robustness check we run our analysis with a continuous V-Dem measure of democracy (Online Appendix F, TableF2 and FigureF1). 16 This figure is constructed using the results from model 3. 654 T.Lenz et al. 1 3 Table 3 Explaining change in delegation (time-series cross-sectional analysis withfixed effects) (1) (2) (3) (4) (5) (6) (7) VARIABLES Baseline Extended baseline Main model With trade intensity With trade intro-version With CINC power asymmetry Excluding Benelux, Caricom, IGAD Policy scope t-1 0.018*** 0.018*** 0.014*** 0.014*** 0.014*** 0.015*** 0.015*** (0.003) (0.004) (0.004) (0.004) (0.004) (0.004) (0.004) Politicization t-1 0.005 -0.025 -0.025 -0.028 -0.025 0.003 (0.058) (0.041) (0.041) (0.041) (0.037) (0.042) Policy scope t-1 * Politicization t-1 0.003 0.004 0.004 0.004 0.005 0.003 (0.004) (0.003) (0.003) (0.003) (0.003) (0.003) Democratic IO t-1 0.001 -0.030 -0.030 -0.032 -0.014 -0.009 (0.045) (0.044) (0.044) (0.043) (0.045) (0.044) Democratic IO t-1 * Policy scope t-1 -0.003 -0.002 -0.002 -0.002 -0.004 -0.004 (0.005) (0.004) (0.004) (0.004) (0.004) (0.004) Democratic IO t-1 * Politicization t-1 0.132** 0.098** 0.098** 0.103** 0.089** 0.079** (0.064) (0.041) (0.042) (0.042) (0.036) (0.039) Democratic IO t-1 * Policy scope t-1 * Politicization t-1 -0.010** -0.008** -0.008** -0.009** -0.008** -0.007** (0.004) (0.003) (0.003) (0.003) (0.003) (0.003) Members t-1 -0.034 -0.034 -0.037 -0.052** -0.028 (0.030) (0.031) (0.032) (0.025) (0.037) Power asymmetry t-1 0.006 0.006 0.006 0.008** 0.005 (0.004) (0.004) (0.004) (0.004) (0.004) GDP per capita t-1 -0.038** -0.038** -0.040** -0.033* -0.046** (0.017) (0.017) (0.017) (0.017) (0.018) GDP dispersion t-1 0.010 0.010 0.007 0.007 0.013 (0.009) (0.010) (0.010) (0.009) (0.009) 661 1 3 Discovering cooperation: Endogenous change ininternational… Broz, J. 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International Theory, 4(1), 69–106. https:// doi. org/ 10. 1017/ S1752 97191 20000 12 Publisher’s note Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. 666 T.Lenz et al. 1 3 Authors and Affiliations TobiasLenz1 · BesirCeka2· LiesbetHooghe3,4 · GaryMarks3,4 · AlexandrBurilkov1 Besir Ceka [email protected] Liesbet Hooghe [email protected] Gary Marks [email protected] Alexandr Burilkov burilko[email protected] 1 Leuphana University Lüneburg, Lüneburg, Germany 2 Davidson College, Davidson, NC, USA 3 UNC Chapel Hill, ChapelHill, NC, USA 4 European University Institute, Florence, Italy