The International Institute first began in 1998 as an exchange program intended to stimulate long-term bilateral cooperation between Swedish and foreign universities.

Initial funding for this program was provided by the Swedish Foundation for International Cooperation in Research and Higher Education (STINT), created in August 1994 by the Swedish Government. STINT is an Independent Foundation, endowed with capital exceeding 1 billion Swedish Kronor. The statutes of the Foundation entrusted it with three main tasks:

• to provide stipends for Swedish postdoctors to spend extended periods at foreign universities as well as for foreign post-doctors at Swedish universities
• to provide scholarships for young academics from countries in dynamic development for studies in Sweden
• to provide supplementary funding of Swedish research and development in connection with the European Union's Fourth Framework Program for Research and Development.

In 1996, the Center and the Stockholm Labratory for Developmental Science jointly applied to the STINT Foundation for support to permit exchanges and bilateral cooperations. The application was approved, and 1 million SEK (equivalent to $138,888) was awarded for 1996, renewable for a maximum of four years at 1 million SEK per year. For several years, these funds permitted collaborators from Stockholm to come to the Center in Chapel Hill, and for Center researchers to visit the Stockholm laboratories in alternating years.

Since that source of funding ended, the collaborating institutions of the Center for Developmental Science, Stockholm University (Sweden), The University of Jyväskylä (Finland), and The Pennsylvania State University have shared the responsibility of coordination and funding to continue the institutes each summer. The Center for Developmental Science hosted the Summer Institute in 1998, 2000, 2005 and 2009 .