The transition process in central and eastern Europe (CEE) had a profound effect on how individuals interact. Economic and social institutions have changed, requiring an adaptation process by individuals in the move toward a market economy. How each individual accesses, manipulates and uses their networks will determine the use of their social capital. Within CEE, there is a presumption of low levels of social capital. This paper was written as a conceptual framework for a research project entitled 'Integrated Development of Agricultural and Rural Institutions' (IDARI) in CEE countries. The paper exposes the emergence and maintenance of cooperative behaviour in light of rural restructuring and institutional change in CEE. A link exists between social capital formation and cooperation amongst individuals, as both concepts imply social interaction and the formation of trust. This paper questions the rationale of applying the contested 'western' concept of social capital to CEE countries. Social networks and use of those networks (social capital) is becoming more important in light of accession to the EU, particularly when opportunities within and access to rural and regional development programmes are dependent on existing networks. Social capital is seen as a dynamic entity, a form of institutional change, which leads to innovation in governance. Thus social capital provides a powerful explanatory tool for processes of institutional change.