In the national quest for competitive advantage two basic forces may be crucial. On the one hand, progressive corporations “invest in inimitability” (the so-called institutional effect). Simultaneously, in the interests of time compressed national progress, policy makers try to facilitate imitation and substitution (in short competition) among the fast followers in the economy instead of leaving it entirely to market forces. In this paper we studied the institutional or demonstration effect provided by Southwest Airlines. It has been credited by the US Department of Transportation (DOT) with almost single handedly providing the discipline for fare restraint and the impulse for market expansion (or “democratisation”) in the US airline industry. It has been called the Southwest Effect. We first examine its diffusion via the bandwagon and competitive effects among the big and small carriers of the US. We then extend the coverage to Europe and Japan to shed light on the Indian authorities' declaration to “democratise aviation in the 21st century”. This mission has its parallels in corporate missions in the automobile and telephone industries of the US and home appliances and equipment industries of Japan decades ago. We conclude that in a policy intensive sector like aviation (where the government has to prevent cabotage and safeguard bilateral agreements) the crux of the matter may lie in “democratised development” than in the particular sectoral focus employed. There may be a great need and opportunity for evolving an innovative methodology for managing and governing the complex process of democratised (or grassroots) development on a societal plane over a couple of decades at a time. The main benefit would lie in facilitating the inter-institutional contest for excellence that may be at the core of such development.