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"Can informal 'traditional' institutions help to build more legitimate, accountable and efficient states and governance? This article aims to contribute to that emerging discussion by unraveling the story of 'Somaliland', a self-declared independent republic which seceded from civil war-ridden Somalia in 1991. The Somaliland secession seems to have been instigated by 'traditional' clan leaders. The clan leaders were also responsible for several instances of political reconciliation between groups competing for power and resources in the region. The political weight of these clan leaders in the new polity had important repercussions for its institutional make-up. Somaliland started out as a clan-based politico-institutional arrangement, with an important role for 'traditional' clan leaders, albeit in a 'modern' framework: a 'state'. The article examines the dynamic between these 'modern' and 'traditional' components and the evolution it underwent from Somaliland's declaration of independence in 1991 to 2007. It will discuss ways and means in which 'modern' and 'traditional' institutions and personnel co-exist, overlap and become reinvented in the context of political competition in the newly founded 'state'." (author's abstract)