The interrelated processes of state formation and nation-building are analysed for two cases: the Netherlands (1795-1960) and the Soviet Union . The central question is: how did these states deal with strong cultural (religious or ethnic) cleavages in its societies. In general, there are three options: elimination, marginalization, and institutionalization. In both states institutionalization was dominant, but the kind of institutionalization differed very much: 'personalistic' (the Netherlands) versus territorial (Soviet Union) institutionalization. The hypothesis has been put forward that, in general, institutionalization on a 'personalistic' basis will create more political stability.