Abstract This chapter reviews the political economy of extractive resources and the resources governance agenda. The consensus that good sector governance improves the developmental impacts of extractive resources exploitation is premised on the understanding that institutions matter for development. However, there is no straightforward answer to the question of what exactly ‘institutions’ are, how they change, or how they can be made to change to become more supportive of an extractives-led development agenda. The chapter suggests turning from the negative question ‘how can poor outcomes be prevented?’ towards the positive question ‘how can positive institutional change be brought about?’ It presents the main strands of a substantial body of literature that can help to inform answers to this question.