<p>With its focus on innovation, institutions have remain under-theorized in evolutionary economics. This paper aims to contribute to Nelson’s institutional agenda within evolutionary economics in two ways. First, we discuss the core concepts of organizational routines and natural trajectories from an institutional perspective. Second, we pick up on Nelson’s co-evolutionary model linking technology, markets and institutions in economic development, and introduce the notion of ‘institutional relatedness’ to understand how institutions both constrain and enable economic development and structural change as well as how institutions channel the direction of institutional change itself.</p>