Abstract: The modernization of community governance is inseparable from institutional rule innovation, social capital construction and community building, which become the three dimensions of analyzing community governance. On the basis of institutional economics, this paper analyzes the development procession of community governance, community governance mode selection and management institution change, bottlenecks of community governance system, and thinking that community system innovation being the foundation to increase the capital stock and to promote the foundation of social capital, customs, ideology and values being all the important components of shaping social capital. The constructive characteristics of social capital requires that under the guidance of the administrative power, the community information exchange channel should be increased, the sub-optimal choice of community residents should be reduced, the level of residents' cooperative game should be enhanced; the rent-seeking behavior of industry authority should be curbed; the transaction costs of community governance should be reduced, the progress of community model in this way can be promoted. However, community governance system bottleneck from the issue of actuality separated with name blocks the formation of communities, so combining with the practice of community governance in our country, this explore the issue of community governance in three dimensions, to build the governance structure of “two-levels government, three-level management, four-level network”, in this way community autonomy can be expanded, social capital can be increased through institutional innovation, and then the community can be improved and constructed well.

Key words: System Innovation, Social Capital, Community, Community Governance, Institutional Economics