We survey significant literature on the role of institutions in industrial revolution. Literature shows that institutions played an important role in facilitating technological progress and thus overcoming Malthusian stagnation. The interaction of economic power, economic and political institutions created the circumstances in which industrial revolution could happen. The decrease in transaction costs led to an expansion of markets. It provided further incentives to improve institutions, as well as to increase the exchange of knowledge and innovation, thus leading to the modern economic regime.