This study examines the causal relationship between terrorism incidents and institutional stability in 215 states and provinces. Data from the Global Terrorism Database is used to categorize the states, and select twenty-four case studies for a micro-level analysis. Institutional instability is measured with three quantitatively established indices of rule of law, government effectiveness, and control of corruption. This study shows that out of all three institutional instability indicators, government effectiveness is most likely to have a causal relationship with quantity of terrorist incidents. Causal relationships are also more likely to occur in states that have low government scores and a large quantity of terrorist incidents. Causal relationships are less likely to occur in states with a low amount of terrorist incidents over time. Outliers such as the United States and the United Kingdom are exceptions to this study. Both states have a high quantity of terrorist incidents yet have high governance scores as well, remaining relatively unaffected by terrorist acts.