How group norms are formed ?

Each group has a set of values or norms that are shared among members that permit them to cooperate with one another. These norms can be generated spontaneously in small and stable groups. Research has shown that some of key group characteristics that impact this are:

Size: System begins to break down as free riders increase in large groups. 

Boundaries: For spontaneous order to occur it is important to put boundaries on group membership. If people can enter and exit at will and it is not clear who the member is then the individuals will have less incentive to worry about their reputation.

Repeated interaction: People worry about their reputation only if they know they will have to deal with one another for an extended periods of time.

Prior norms establishing a common culture: The establishment of cooperative norms often presupposes the existence of a set of prior norms held in common by individuals making up the group.

Power and Justice: Informal social norm can frequently reflect the ability of one group over another 

Persistence of bad choices: Unjust and counterproductive norms can disappear spontaneously if is did not serve the interest of the group.

Ref: Extracts of article by Francis Fukuyama (Culture Matters)