Technological Trajectories and Path Dependence

This paper is concerned with the notion of path dependence as a framework to understand technological trajectories. The notion of path dependence has been deployed in the economic history and historical sociology literatures to explain sequences of events related mainly to technological and institutional evolution. We adopt a notion of path-dependence that subdivides sequences of events into self-reinforcing and reactive sequences. We further propose that path dependent sequences can be recast in terms of the agency-structure dualism set in a relational-temporal context. In the second part of the paper, we introduce a case study that illustrates the usefulness of path dependence as a general framework to understand the technological trajectory of the division of a firm involved in a complex change process. Finally, we discuss the implications of using path dependence as a tool to understand change processes in firms and industrial networks. INTRODUCTION This paper intends to explore the notion that “history matters” in the evolution of industrial systems. The development of theories of evolution of industrial networks merits a closer examination of the notion of temporality and pattern of connection between events (Aminzade, 1992). Our intention is to rethink the notion of path-dependence in terms of the interplay between action and structure, in which both action and structure embody a variety of temporal orientations. A simultaneous attention to action and structure highlights the importance of understanding path-dependence not simply from a retrospective perspective but also from an actor-centred standpoint, focusing on how actors react to an uncertain future in real time. Sabel and Zeitlin (1997) mount a critique of path dependence based on its insensitivity to the situated reflexivity of actors who, faced with critical choices, may adopt a variety of coping strategies rather than being forced into commitments that may be difficult to reverse. The structure of the paper is as follows: in the first part we will survey current uses of the notion of path dependence in the economic history and historical sociology literatures. Our argument is that the notion of path dependence is best understood as a general framework to understand how temporal-relational contexts of action are formed and how specific events can contribute to their reproduction or transformation. In the second part of the paper, we introduce a case study that illustrates the use of path dependence to chart the evolution of a technology. In the final part of the paper we will suggest some conclusions and implications from our study. A BRIEF REVIEW OF THE PATH-DEPENDENCE LITERATURE The notion of path-dependence has been deployed within the industrial networks literature largely to account for the stability and change of technological systems (Lundgren, 1995; Håkansson and Lundgren, 1997; Håkansson and Waluzewski, 1999). Håkansson and Lundgren (1997) provide the most comprehensive review of the topic from an industrial networks perspective. In this paper we wish to build on this contribution by recasting the notion of path dependence in a relational-temporal context. The notion of path-dependence in the social sciences has largely been developed by economists concerned with the evolution of technology and institutions and has partly served as a platform to reinstate “history” back into economic theory. The best known representative of this new brand of economic history, sensitive to both historical singularities and systematic generalisations, is David’s (1985) story of the emergence and persistence of the QWERTY keyboard. The pioneering influence of Arthur (1989, 1994) and David (1985, 1988) on the economics of technology was later mimicked in institutional economics most notably through the work of Douglass North (1991). Magnusson and Ottosson (1997) contain a number of surveys on the evolution of technologies and institutions from a path dependence perspective. The definition of path-dependence adopted by David (1985:332) was: “A path-dependent sequence of economic changes is one of which important influences upon the eventual outcome can be exerted by temporally remote events, including happenings dominated by chance elements rather than systematic forces. Stochastic processes like that do not converge automatically to a fixed-point distribution of outcomes, and are called nonergodic. “ This definition highlights two important issues. First, path dependence is a property of sequences of events, in which a particular process is unable to shake free from the influence of its past states or motions (David, 1988). Secondly, path dependent processes combine general processes with processes that are unique and unpredictable, merging necessity and chance in the same sequence. Antonelli (1997) makes a useful distinction between past and path dependence using simple and complex Markov chains. If events within a specific system at an arbitrary time t, can be predicted on the basis of the state of the system at time t-1 – independently of how the system arrived at time t-1 – then we are referring to past rather than path dependent processes. By contrast, if the probability of transition of a system from state t-1 to t is dependent not only on the state of the system at t-1 but also on the transitions between previous states (t2,.,t-n), processes are non-ergodic and fully path dependent. In path dependent processes, agents are assumed to be “state dependent” and yet still be able to generate structural changes 10 See also the special issue on path dependence of the International Journal of Industrial Organization Vol. 15, 1997. and modify the behaviour of the system in unpredictable ways either intentionally or indirectly via the unintended consequences of aggregate actions. 11 Path dependent sequences require explanation as to how the systematic and contingent association between sequences of events comes about. In explaining path dependent sequences, we are thus forced to dig deeper into the causal mechanisms that account for the sequential and logical association between events (Goldstone 1998; Haydu, 1998). Path dependence arguments suggest that there is more to the world than patterns of events. The world has ontological depth. Events are the products of mechanisms that derive from the properties of objects acting in specific spatio-temporal contexts. Furthermore, there is an “out-of-phaseness” between the operation of causal mechanisms and the effects they produce (Sayer 2000:15). The asynchrony between causal mechanisms and their effects invokes a spatial and temporal spread of causes. In particular, current events bear the imprint of past events through the operation of social and material structures that act as the “carriers of history”. The notion that current events may have remote temporal causes means that the present is past but not necessarily path dependent. Past dependence is pervasive and inevitable, path dependence is not. The notion of path dependence means more than past-dependence or saying that yesterday’s choices, embodied in durable structures (e.g. technologies, institutions), are the initial point for today’s choices. Path dependence signifies that the ordering in which things happen affect their sequence and temporal unfolding. And, the operation of agency at a particular point in time may activate a whole series of further and connected options as well as foreclose other possible alternatives (Tilly, 1994). The notion of path dependence does not imply that the future is in any way closed. The notion that events can have remote temporal causes does not amount to saying that they are predetermined. Social systems are open systems and the operation of causal mechanisms is contingent upon certain contextual conditions – namely on the spatial and temporal relations with other causal mechanisms that may trigger, block or modify its actions and produce different outcomes on different occasions (Sayer 2000: 15). There is thus nothing inevitable about specific sequences of events; events could often and easily have turned out otherwise. Mahoney (1999) surveys the use of path dependence in historical sociology and identifies two different streams of uses of the notion. The two uses of path dependence focus on selfreinforcing and reactive sequences of events. During self-reinforcing sequences the analysis focus on the mechanisms that reproduces patterns of events over time – the mechanisms that keep “history on track” (Haydu 1998: 353). This type of analysis often focuses on both the contingent, path shaping conjunctures that switch events on to particular tracks as well as the mechanisms that lock-in subsequent events to a particular trajectory. By contrast, in reactive 11 The role of path dependence in economic processes is the subject of some controversy in the economics literature. On one hand, the opponents of path dependence regard it as no more than a way of stating that history matters or that decisions taken today have durable consequences whose effects cannot be predicted in advance (Liebowitz and Margolis, 1995). The thrust of this critique seems to be on the notion of whether or not outcomes of historical processes are efficient (e.g . QWERTY keyboards) and if they are inefficient, whether they can be remedied ex-ante. David (1997) rebuts these criticisms and disentangles the contingent association between path dependent and inefficient outcomes of evolutionary processes. sequences initial events trigger a sequence of tightly linked reactions in which the initial move rather than being reinforced over time, moves the system to new paths. Historical sociologists, like economic historians, often focus on conjunctures arising from the temporal intersection of different trajectories. At these conjunctures, actions can become highly consequential and the possibilities for rearticulating structures arises, whether or not agents