Understanding Institutional and Organizational Path Dependencies

The notion of path dependence has become so popular that it is almost commonplace to describe the development of institutions and organizations as being path dependent.1 This is as true for strategic management and organization theory as it is for economic geography and institutional analysis of society. With its increasing popularity, however, the notion of path dependence has progressively lost a specific meaning. Most often it is merely used as a metaphor accentuating that history matters when explaining cultural artefacts. This is all the more regrettable as problems of path dependence seem to trouble an increasing number of institutions and organizations. No doubt explanations of persistence and rigidity can profit a lot from a re-sharpened concept of path dependence building on the ideas as originally put forward by Paul David (1975, 1985, 1986) and W. Brian Arthur (1989, 1994) in their economic investigation of the diffusion of technologies, the QWERTY keyboard layout being their most prominent example. Some institutional and evolutionary economists have taken up this analytical understanding of path dependence and extended its usage to the institutional area (e.g., North, 1990; Witt, 1997). The same is true for studies in historical institutionalism and comparative politics (e.g., Pierson, 2000), but the bulk of research in these areas, as well as in the field of organizational analysis, refers to the notion of path dependence only in a rather loose way.