European Contributions and Concepts
New Horizons in Institutional and Evolutionary Economics series
Edited by Jürgen G. Backhaus
Chapter 6: Reconstructing the early history of path-dependence theory
1 Staffan Hultén INTRODUCTION Had Joseph A. Schumpeter never written ‘Add successively as many mail coaches as you please, you will never get a railway thereby’ or dared to suggest that it is possible to write the economic history of the United States in the second half of the 19th century in terms of railroad construction and its effects, the pathdependence theory would perhaps never have emerged.1 Path-dependence theorizing is path-dependent on the evolution of thought in the social sciences and it so happened that Schumpeter’s grand example triggered intellectual developments that had direct influence on path-dependence thinking. Path-dependence theory continues to develop and to some extent there exist different visions of what we mean by path-dependence theory. In my mind path-dependence theory proper is the theory codified by P.A. David and W.B. Arthur during the 1980s. One of the most renowned claims of this path-dependent theory is that a winning technology may not be the best choice because small historical events can give an initial advantage to an inferior technology. The initial advantage creates a snowballing effect, based on learning-by-doing and learning-by-using and a rapidly expanding installed base that attracts investments in production, R&D and marketing. The technology is locked in.3 A very common source of lock-in in a dynamic setting is that the actors ‘prematurely’ select a technology without giving sufficient time for the competing technologies to develop. The short term gains from internal production economies and often from external economies defeat the long term advantages...
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