Diffusion and Decentralized Bargaining in International Organizations: Evidence from Mercosur's Dispute Settlement Mechanism

Abstract

Abstract How and with what effects do institutions diffuse between international organizations (IOs)? An emerging literature extends a key insight of the study of diffusion processes among states to the international level, establishing that the adoption of institutions in IOs is regularly conditioned by the choices of other IOs. Yet, this literature neglects a key contextual difference between the two settings: unlike in the hierarchically structured organizations that have dominated the literature on diffusion, institutional creation, and change in IOs are the result of decentralized bargaining among sovereign governments. This paper develops a heuristic model that shows how diffusion between IOs shapes decision-making within them through its impact on the institutional preferences of individual governments. The model establishes that, unlike in diffusion processes among states, convergence is an unlikely outcome of diffusion between IOs. By implication, studies that take institutional convergence as their starting point are likely to underestimate the pervasiveness of diffusion effects. I demonstrate these arguments with a case study of the establishment of a regional dispute settlement system in Mercosur, a regional organization in Latin America.