The missing link between the theory and empirics of path dependence: Conceptual clarification, testability issue, methodological implications

Journal of Management Studies 47:736-759 (2010)
Abstract
Path dependence is a central construct in social sciences, used to describe a mechanism that connects the past and the future in an abstract way. However, across disciplines, it remains unclear why path dependence sometimes occurs and sometimes not, why it sometimes lead to inefficient outcomes and sometimes not, how it differs from mere increasing returns, and how scholars can empirically support their claims on path dependence. Hence, path dependence is not yet a theory since it does not causally relate identified variables in a systematized manner. Instead, the existing literature tends to conflate path dependence as a process (i.e. history unfolding in a self-reinforcing manner) and as an outcome (i.e. a persisting state of the world with specific properties, called ‘lock-in’). This paper contributes theoretically and methodologically to tackling these issues by: (1) providing a formal definition of path dependence that disentangles process and outcome, and identifies the necessary conditions for path dependence; (2) distinguishing clearly between path dependence and other ‘history matters’ kinds of mechanisms; and (3) specifying the missing link between theoretical and empirical path dependence. In particular, we suggest moving away from historical case studies of supposedly path-dependent processes to focus on more controlled research designs such as simulations, experiments, and counterfactual investigation.
Keywords path dependence  testability  falsifiability  counterfactual  randomness  contingency  predictability  increasing returns  equilibrium
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