Origins of the Sects (Nikayas) in India.
Buddhism began to spread geographically already during the Buddha’s time with the Buddha’s encouragement. Soon Buddhism began differentiating itself into separate sects, or nikayas, seemingly along geographical lines, much as linguistic dialects tend distinguish themselves over time. For instance, the Sarvastivadin sect apparently developed around Kashmir, the Dharmageluptaka in Gandhara, the Mahasangika in Mathura, the Theravada in Sri Lanka, etc. Each typically introduced some modifications or specific interpretations into the original teachings of the Buddha, and at some time or other each committed an oral tradition to written form, in one language or another. For instance the Dharmageluptaka scriptures were recorded in Gandhari (these include the oldest surviving fragments of Buddhist scriptures), the Sarvastivada in Sanskrit and the Theravada in Pali.
Accounts within some of the nikayas themselves attribute the sects to great schisms within monastic communities, basically in which part of a sangha leaves in a huff to form its own communion because of some disagreement about either Dhamma or Vinaya. Exactly as one would expect each school portrays itself in heroic terms as the non-schismatic party in its own account. Ven. Sujato and other scholars cast doubt on the veracity of any of these accounts, and they may actually have originated when geographically dispersed nikayas reestablished contact and discovered to their dismay that they no longer interpreted the Dharma-Vinaya in precisely the same way. I’m not convinced that any of the doctrinal differences among these sects is really that significant in the scheme of things. For instance in its account of the great schisms the Theravada sect upheld the standard that monks do not hold money and the view that the Buddha was not a supernatural being. However today it is very common indeed for Theravada monks to receive and spend money offerings, and to believe in supernatural properties of the Buddha, for instance, that the Buddha’s body and clothing would have remained perpetually clean without laundering or bathing.
Although each nikaya had some scriptures of its own, they also all seemed to have shared a set of scriptures essentially in common, with very few differences in doctrinal content. This set by and large corresponds to the Sutta Pitaka and the Vinaya of the Theravada Pali tradition, or the various versions of the Agamas and Vinaya preserved in Tibetan and Chinese translation. These two parts give us the “Dharma-Vinaya,” the Buddha’s own phrase for the totality of his teachings:
The Dharma has to do with the understanding and practices that lead to liberation, and with the development of an environment of faith, resolve and support to keep one on that path.
The Vinaya defines the community that could embody and retain the integrity of the teachings, and that could instill faith in others and ensure the perpetuation of an authentic living Dharma. The caretakers are the monastic Sangha who live in a relation of mutual support with the laity.
The discovery of commonality among widely dispersed sects, first announced by Samuel Beal in 1882, clearly indicating a common source, was one of the great breakthroughs in reconstructing the history of early Buddhism. The sectarian deviations of this common source generally contain some spurious material and edits, and scholars believe some of the content may have originated in one of the schools and propagated to the others, but by and large this common source is generally assumed to represent fairly accurately original Buddhism. The nikayas variously added commentaries to this corpus, including the various Abhidharmas which do not agree closely with each other in content. In Theravada a large set of commentaries compiled in Sri Lanka 900 years after the Buddha enjoy almost scriptural status, still secondary to the Suttas, the Vinaya and the Abhidhamma. In these commentaries the Abhidhamma is attributed to the Buddha, but this seems to have no support at all in modern scholarship, and Pali is declared to be the Buddha’s original language, now widely regarded as unlikely.
Along Comes Mahayana.
Although the individual nikayas, each having engaged in some creative reworking of the Buddha’s teachings, are classified together in Mahayana parlance as the “Hinayana,” the lesser vehicle, and in common modern terms as “Nikaya Buddhism.” The Mahayana does not seem to have developed within a particular nikaya nor as distinct nikaya, but rather as a progressive movement simultaneously within most of the various nikayas. This began when Buddhism was already quite mature in India, in the early years of the Christian Era in northern India, at the time Buddhism was also beginning to spread along the Silk Road into China.
Much of this first millennium CE in northern India seems to have been an era of very liberal thinking, of free Buddhist inquiry and debate; the era of the great scholar-monks, Nagarjuna, Shantideva, Vasubandu, and so on; the era of the great Buddhist universities like Nalanda, which were willing to bring students and teachers together in one place to discuss the whole spectrum of Buddhist thought both orthodox Nikaya and modern; and the period in which many apocryphal Sutras were composed, the Prajnaparamita Sutras, the Lotus Sutra and so on. I picture it as much like what developed much later in the Western post-Enlightenment intellectual milieu; Sanskrit became the common language of Buddhism in northern India. Theravada Buddhism in Sri Lanka and adjacent areas of Southern India were somewhat removed from this rich intellectual world of Northern India, but the Mahayana movement would eventually extend to most of the southern Buddhist lands as well.
It seems that “Mahayana” has come to designate all that was innovative during this period. In fact no self-identified Mahayana movement existed until after many of the “Mahayana” Sutras had already been composed and many of the “Mahayana” philosopher-monks were already pushing up daisies. Nagarjuna, for instance, sometimes regarded as the Second Buddha or the father of the Mahayana, lived before there was a recognizable Mahayana movement. David Kalupahana, maintians that Nagarjuna’s work actually adheres very closely to the early Suttas/Agamas, and argues that his role was really to champion and revive some of the original philosophy of the Buddha, not to supplement it. His work expounds the concept of Emptiness, introduced by the Buddha a bit obscurely, but now equated in Nagarjuna’s hands with a generalized notion of Dependent Coarising. Nagarjuna apparently never mentions, for instance, the Bodhisattva Ideal or the transcendent nature of the Buddha, or other themes later championed in the Mahayana movement.
The emergence of the new-fangled Mahayana movement, when it had assumed a name, was very gentle and gradual. Paul Williams, in the introductory chapter of Mahayana Buddhism: The Doctrinal Foundations, writes, “Mahayana was not in origins, and really never was, a rival sect… Mahayana-oriented monks, and monks with no interest in Mahayana whatsoever, could live without necessary discord in the same monastery so long as they held the same code [of monastic discipline].” This is according to the testimony of Chinese pilgrims who wandered back into India during this period. Mahayanists also did not in general attempt to refute the earlier teachings, and as a rule still don’t, but saw themselves as supplementing them with an optional higher standard of practice and understanding, that of the bodhisattva. It is ironic that this movement that came to be associated with the view of a transcendent, more-than-human Buddha, felt such great need to enrich the Buddha’s teachings. Apparently Mahayana acquired an institutional identity in India only after certain donors beginning in remote regions began to fund monasteries specifically for Mahayana-oriented monastics.
Although Mahayanist monastics were reading sutras that supplemented the early sutta/agamas, they continued to ordain in the various nikaya sects, all of which observed the traditional versions of the Vinaya. No one in India ever ordained as a Mahayana monk or nun that we know of. Almost certainly some of the Indian Mahayanists were even ordained in the Theravada school, since the Mahayana movement at one time extended to Sri Lanka. Today Mahayana monks and nuns ordain in the Land of the Chopstick according to the Dhammaguptaka nikaya, generally regarded as a very close relative of Theravada, and according to the Mulasarvastivada sect in Tibet and adjacent regions. The great Mahayana movement supplemented the Dharma and left the Vinaya untouched.
China seems to have become heir to almost everything that was going on or was available in Northern India in the First Millennium CE, whether is counted as Mahayana or not. The same can be said of Tibet, and Tibet seems to have particularly well continued the university system and the culture of exploration and debate of Northern India. Tibet also became heir to developments of the Tantric movement that spilled over into Buddhism from Hinduism in Kashmir. All this was lost in northern India in the early second millennium CE with the loss of virtually all of Buddhism after the Muslim incursion from the West, stranding Buddhism in outlying regions, including China, Tibet and Southern Asia, for many centuries.