This article looks at some methodological issues that confront development research when local institutions are studied. It considers ways of formulating working concepts that are useful for obtaining information on institutions and their dynamic processes in relation to the economic activities of rural households. It presents and evaluates some quantitative and qualitative methods on the basis of case studies in Mexico and India, and considers the scope and limitations of these. The conclusion is that a flexible, multidisciplinary conceptual and methodological framework is needed to understand the dynamics of institutional processes, from established rules and norms to people’s organizing practices. It is stressed that policy-oriented research has to focus on specific objectives, such as institutional arrangements capable of supporting the poorest groups, and ways in which these groups can mobilize to transform institutions.