The emergence and behaviour of local institutions are of increasing interest as managers, policy‐makers and communities assess the potential for these institutions to supplement conventional resource management approaches. Lake associations are local organizations that address management issues using informal and voluntary strategies and stress stakeholder participation. Insights from the Institutional Analysis and Development (IAD) Framework are applied to advance our understanding of the capacity of these local institutions to contribute to lake management. The lake associations of Maine, USA, are the focus of our empirical work. A database describing natural and human features of 2602 Maine lakes was assembled to support a probit model of lake association presence/absence. The lake database was combined with a survey‐based database to develop ordered probit models of success at managing five issues. Lake association presence was positively correlated with resource characteristics, including prior lake impairment, presence of public boat launches and recreational fisheries, and lower levels of surrounding forest and agricultural land cover; and institutional characteristics, including multiple political jurisdictions and organized territories and participation in collaborative lake monitoring programs. Across multiple issues, lake association management success was positively correlated with the level of attention given to a specific issue. These results offer guidance on how to better integrate the informal approaches of local institutions with more formal, regional government‐based management approaches and reveal the need for further research of what issues these stakeholder‐engaged institutions are best suited to address.