The inquiry into the fundamental drivers of societal progress and stagnation has long occupied a central position in social and economic thought. In contemporary literature, New Institutionalists such as Douglass North and Daron Acemoglu have sought to explain the divergent trajectories of societies by elucidating institutional mechanisms and demonstrating the correlation between the quality of political and economic institutions and developmental outcomes. Conversely, Muhammad Baqir al-Sadr advances a distinct framework of social transformation through a historical and analytical methodology centered on the pursuit of justice, public participation, and communal leadership. Employing an exploratory and comparative-analytical approach based on primary textual sources, this study critically examines these two paradigms. The findings reveal that al-Sadr, unlike New Institutionalists, conceptualizes institutions as inherently ideological and value-laden. He contends that institutional effectiveness and legitimacy cannot be objectively evaluated in isolation from a comprehensive ideological worldview and the fundamental criterion of justice. While New Institutionalism implicitly presupposes liberal capitalism as an indispensable prerequisite for development, al-Sadr posits that the normative evaluation of social systems based on justice must logically precede the appraisal of individual institutional arrangements. Furthermore, al-Sadr identifies the primary catalyst for societal transformation not merely in elite management, social pressures, or critical junctures, but fundamentally in inner human transformation and the ideological alignment of the community (Ummah). Within this framework, in contemporary Iran, the institution of Wilayat al-Faqih (Guardianship of the Jurist), the jurisprudence-based constitution, and the sociopolitical structure fostering public alignment with the Islamic system provide the institutional foundation for developmental progress. This structural alignment has enabled the country to overcome the historical cycle of dependency and underdevelopment, charting a distinct trajectory from secular models. Ultimately, al-Sadr’s justice-oriented theory presents a robust normative critique of secular functionalist institutionalism, offering a viable alternative developmental model for Islamic societies.