Path dependency is an acknowledged characteristic of tourism due to a majority of small and micro-sized firms and with that limited resourceful actors who can engage actively in path creation through development of new services and experiences. The aim of this paper is to analyse the socio-economic institutions that have facilitated the rise of coastal tourism, and on the basis of this to gauge the scope for incremental change, or plasticity, within the prevailing development path. The paper can be seen as an explorative study of the micro-dynamics of path plasticity, adopting a casestudy-based approach, exploring two coastal-rural destinations in North Jutland, Denmark. First a review of the literature on destination development and innovation is undertaken in order to identify key issues concerning continuity and change in tourism as a spatially embedded socio-economic activity. Then a conceptual framework for the analysis is outlined, inspired by traditions within institutionalism. Thirdly, the empirical analysis begins by identifying the key institutions supporting the rise of North Jutland as a successful international tourist destination in the 1980s and 1990s, and finally we discuss the extent to which scope for path plasticity can be found within this framework in the current climate of crisis, focusing especially on the role of combinatorial knowledge and policy agency. It is concluded that coastal tourism despite resemblances of an institutional ‘iron triangle’ actually is a more flexible structure which allows for a considerable degree of incremental change, provided that the actors involved are willing to engage in innovative development activities within the existing institutional framework.