In sociocultural and activity-theoretical perspectives, institutions are understood as communities of practice with intermediary functions; they regulate and handle conflicts and dilemmas between individuals and collectives in society. How institutional actors deal with such dilemmas, and what consequences their activities will have for the collective as well as for individuals, are important issues to explore (Engeström, 2005a; Engeström & Toivianen, in press). Through their rules and practices, institutions act as arbiters of opportunity, making decisions about how certain situations are to be interpreted in an ambiguous world of complex social activities (Mäkitalo & Säljö, 2002a). One interesting feature of such communities is how they accommodate the emergence of tensions and conflicts that challenge the institutional order and established practices. In this chapter we primarily address the notion of community in this sense, with a focus on how institutional agency is constituted at the local level.

A historically significant conflict in society is that between labor and capital. Many of the institutions that are responsible for health care, social welfare, or taxation, for instance, directly or indirectly intervene in such matters when making decisions as to whether individuals and groups are entitled to certain benefits. In times of societal transformation and changes in production, tensions may emerge in the labor market concerning the obligations and entitlements of workers and employers. During such periods of transformation, institutions have to respond to new challenges coming from the outside.