PATH DEPENDENCY AND ORGANIZATION CHANGE: Myths of Path Dependency Theory

Posted by Kathryn Schwartz on February 27, 2014
Organizational Practices

PDT explains the fundamental reasons it is so hard to change organizations. It is true that most organizations, which have a significant history, are influenced by PDTto certain degrees. However, PDT seems to be a static and deterministic view, excluding the possibility for organizational change. According to the extreme view of PDT, organizations are constrained by their past and are hard to make innovative or dramatic changes beyond what they have done in the past. In terms of this perspective, we cannot explain how Japanese companies, which were devastated by World War II, gained competitive advantage over companies from other countries which had favorable past performance histories. Furthermore, PDT cannot explain why the big three U.Sauto companies, which had had glorious history in the past, are going through painful downsizing and shutting down their factories.

However, suchinterpretations result from the misinterpretation of PDT. Path dependency does not refer to the final situation or the end of game, regardless of experienced inertia and persistence. Sydow et al. says (2005) “Lock-in is the social situation in which an individual actor or a group of actors have lost (at least partly) their power to choose among alternatives because a path reproduces a certain pattern of decisional behaviors.”If actors restore their decision power and break pattern of actions, they can unlock and even create new paths. Therefore, the economic miracle of Japanese companies might be explained by path dissolution through the creation of innovative management practices, including quality circles ,lean systems, and total quality systems. The crisis of the Big 3 might be explained by alock-in situation, in which flexibility was lost, and the old paradigm of the past was unaltered.It could be said that organizations might be trapped in lock-in situations, but do have discretionto change that these situations. The next section in this paper will focus on how organizations can unlock their old paths and create new paths.Figure 2 illustrates the processes of breaking and creating organizational paths.

Fig2Path Dependency and Organization-2
Figure 2: Breaking and Creating Organizational Paths How to Break Path Dependency Assess Path Dependency

First of all, organizations should be aware of their current path dependence status in order to unlock their paths. Before reaching lock-in or even in lock-in status, firms might reap positive feedbacksfrom their current paths. In addition, some of current paths might be critical components of their competitive advantages. Nevertheless, every path has potential to lead organizations to lock-in situations. Paths seduce them to establish deterministic patterns. Unfortunately, the cost of lock-in and structural inertia is very expensive in the competitiveand dynamic environment. Organizations must be fluid and flexible enough to successfully respond to the constantly changing needs of markets and customers. As explained earlier, lock-in situations decrease the scope of alternatives and flexibility of companies. Moreover, the longer organizations stay on one path, the greater the resistance and inertia towards changes is created. Therefore, it is essential for organizations to recognize their deterministic patterns as early as possible in order to minimize the negative effects of path dependence. However, this assessment is only possible when organizations recognize that existing structures may create inefficiencies in the present and deviation from current paths are required to create new futures(Garud & Karnoe, 2001). They define this process, whichassesses and challenges path dependency, as “mindful deviation”.

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