Organizational Path Dependence: Path Constitution Analysis

Given the relative newness of path dependence research in organizational

sciences, most empirical investigations have used qualitative methods, in particular, case studies, along with some simulation studies and experimental designs (Sydow et al., 2012). Vergne and Durand (2010) argue that to effectively test for the existence of path dependence, the only acceptable methods are controlled designs (i.e. computer-based simulations, experimental studies and counterfactual investigation), as case studies allow for researcher bias in the interpretation of results. In addition, they argue that the ex-post nature of the methodological approach does not allow for testing of contingency or long-run equilibrium. That is, case studies are often historical in nature (except ethnographic studies) and presume that path dependence has occurred based on a set of observable data and assumptions of randomness.

Garud, Kumaraswamy, and Karnøe (2009) counter argue that controlled designs are no more objective than case study research (or narrative analysis) and cannot

accurately represent the real world. Following suit, Sydow et al. (2012) put forth a specific methodology, Path Constitution Analysis (PCA), for analyzing the constitution of an organizational path and evidence of lock-in – a method grounded in both path dependence theory and path creation theory (Garud & Karnøe, 2001).

Drawing from Giddens’ (1984) structuration theory, Sydow et al. (2012) propose that the analysis of path dependence must address the processual nature of the theory and the embeddedness of actors within the process. They argue that research methods on characterizing an organizational path and testing for strategic lock-in should use an

“interpretative, social constructivist manner (Lincoln & Guba, 1985) without, on the one hand, sticking to methodological individualism or simply applying an institutional or structural analysis on the other” (p. 2). Thus, they propose Path Constitution Analysis (PCA) as a method that supports the investigation into the constitution of an

organizational path.

As a methodological approach, PCA incorporates the potential agency of actors by encouraging the investigation into six constitutive features of the path: level

interrelatedness, triggering events, non-ergodic⁷ process, self-reinforcing processes, lock-in, and multiple actors who “intentionally or unintentionally (re-)produce the path in time-space” using a longitudinal approach (Sydow et al., 2012:5) (see Table 2). Although in their example of the application of PCA they use only qualitative data, Sydow et al.

(2012) encourage the use of both qualitative and quantitative data, and argue that a number of qualitative analytical methods (i.e. temporal bracketing, content analysis, and event analysis) can be employed. Most importantly, they argue in support of a qualitative case study approach, informed by theory, which considers the important role of actors in the process. The case would allow for the investigation into the six constitutive features, which are discussed as follows.

7 Sydow et al. (2012) draw on David’s (1985, 2001, 2007) and Arthur (1989, 1994) to define non-ergodicity as follows:

...paths are non-ergodic (Arthur 1994; David 2001, 2007); while different outcomes are possible at the beginning, the range of options narrows down over time in the face of self-reinforcing processes, in the form of “increasing returns” (Arthur 1989, 1994; David 1985), for instance, which determine the outcome of the process and will most likely lead into a technological, institutional or organizational lock-in.”

Table 2: Constitutive Features and Potential Indicators of Paths (Sydow et al., 2012: 2)

Level interrelatedness. Sydow et al.’s (2012) model of Path Constitution Analysis is grounded in structuration theory. They argue that strategic behaviour is played out by powerful agents through recursive activities both within their level (e.g. the organization) and between levels (e.g. the industry, the media, and other stakeholders). PCA therefore implies that the researcher analyze the path from a focus level of analysis but within the context of a greater boundary. Evidence of interrelatedness must exist to characterize the constitution of the path.

Actors. At least two actors or actor groups are required in the development of the path, whereby the actors influence each other, the path, or both. Actors may exist at the upper or lower boundary levels, in addition to the focus level of analysis.

Triggering events. A triggering event is one that influences the strategic path in the long run. At the time, it may seem neither important nor relevant, but in retrospect, a triggering event is identified as a critical event in time that directly influenced the

subsequent strategic choices at the level of analysis. The actors may or may not be aware of the triggering event but either they or a third party is able to retrospectively attribute the event as a direct cause to the path trajectory.

Non-ergodic process. Non-ergodicity suggests that the constitution of the path is not random, although initially the formation of the path (and associated lock-in) is not guaranteed. Strategic options are initially available, due to events occurring either simultaneous or sequentially, or both. A specific path emerges over time, as strategic options are reduced. Non-ergodicity also implies, however, that options are not eliminated; rather, many options are available, but the likelihood of their occurrence drops substantially, leaving only a few choices available in the end.

Self-reinforcing processes. The self-reinforcing processes that provide

coordination, complementarity, learning, and adaptive expectation effects operate within the focal level of analysis and the upper and lower boundary levels). Through positive feedback, these processes initially are rent-seeking and, in combination, carve out a particular strategic path. Over time, due to the rent-seeking nature of the processes (and their degree of embeddedness), they may lead to rigidity, a form of strategic inertia that results in lock-in.

Lock-in. Lock-in occurs as a likely outcome to the self-reinforcing processes previously discussed; that is, the outcome is predictable. Lock-in does not suggest or imply that options are eliminated; rather, lock-in occurs in spite of other options being available, due to the self-reinforcing processes and the cognitive and normative

understanding of strategic decision makers. Although actors may have choices, only one strategic option may seem legitimate while other options may seem inferior.