Human lifestyles vary enormously over time and space and so understanding the origins of this diversity has always been a central focus of anthropology. A major source of this cultural variation is the variation in institutional complexity: the cultural packages of rules, norms, ontologies and expectations passed down through societies across generations. In this article, we study the emergence of institutions in small-scale societies. There are two primary schools of thought. The first is that institutions emerge top-down as rules are imposed by elites on their societies in order to gain asymmetrical access to power, resources and influence over others through coercion. The second is that institutions emerge bottom-up to facilitate interactions within populations as they seek collective solutions to adaptive problems. Here, we use Bayesian networks to infer the causal structure of institutional complexity in 172 small-scale societies across ethnohistoric western North America reflecting the wide diversity of indigenous lifestyles across this vast region immediately prior to European colonization. Our results suggest that institutional complexity emerges from underlying socioecological complexity because institutions are solutions to coordination problems in more complex environments where human–environment interactions require increased management.