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Edited by Laura Anna Costanzo and Robert Bradley MacKay
Chapter 27: Addressing Path Dependency in the Capabilities Approach: Historicism and Foresight Meet on the ‘Road Less Travelled’
Swapnesh K. Masrani and Peter McKiernan Introduction This chapter challenges the commonly held notion in the capabilities approach, arising out of an overemphasis on path dependency, that capability development follows a single path-dependent route, which is determined positively by interrelatedness among existing technologies. It queries the fascination especially within the empirical literature with examining a single, successful choice. The chapter argues, like Penrose (1959) and Hamel and Prahalad (1994), that a ﬁrm seldom considers only one strategic capability development route. Often, a route is chosen from a bounded option set, anchored by the ‘do-nothing’ default. This is supported by empirical case evidence, which also suggests that, in some instances, technological interrelatedness is not a major factor inﬂuencing the development of capabilities from the available options. The chapter is structured as follows. First, we review key literature in the capabilities approach (that is, Barney 1991; Teece et al. 1997) and describe how, in an attempt to ‘engage’ with history, path dependency has played a central role in its theoretical construct. We then argue that an attempt by strategy researchers to equate ‘serious’ engagement with history by using only the notion of path dependency is highly erroneous. In particular, three issues of concern are identiﬁed, namely, a myopia in strategic choice, causal bias and eﬃciency assumption. Second, we review how historians have addressed these problems, with a view to incorporating these suggestions into an empirical study. A key historicist technique is to examine the multiple options that were available...
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