How History Matters in Organizations: The Case of Path Dependence

Abstract

The quest to consider the historical side of managerial and organizational action has become increasingly accepted. An open question is still how this can be achieved systematically. In this paper we refer to the theory of path dependence as an interesting candidate to fill this gap. The problem with the notion of path dependence is, however, that whilst being much quoted, its actual meaning and logic have remained vague and ambiguous. In order to provide a clear template for the consideration of historical relations and how they impact on present and future developments, we present a comprehensive theoretical framework clarifying how organizations become path-dependent. The process of an organization – or some of its subsystems – becoming path-dependent is conceptualized along three distinct stages: Preformation, Formation and Lock-in Phase. A case from the German publishing industry is used to demonstrate the potential explanatory power of this processual framework. The case study focuses on a book club that has, after years of huge success, persistently suffered a decline and losses for more than 10 years. Reasons are given why and how this book club has become path-dependent and, finally, locked-in.

Keywords: Business history, case study, complementarity, media industry, organization theory, path dependence, process theory