Addressing Path Dependency in the Capabilities Approach: Historicism and Foresight Meet on the ‘Road Less Travelled’

Abstract

the presence of various capability options available to the firm and; second, to also examine why a capability option (i.e. the Road Less Travelled) was 'not' pursued (here the emphasis is on juxtaposing alternatives and inductively identifying historical events and factors that led to selection of one option over the others) as opposed to a sole focus upon why an option 'was' pursued (here the emphasis is solely on the justification of path dependency and its underlying features e.g., technological interrelatedness, increasing returns, dominant logic etc, associated with the successful choice). The third section uses this theoretical suggestion to examine capability development in the Dundee Jute Industry (DJI). It addresses the three major concerns with path dependency, illustrating them from the archival-based case studies of firms in the DJI between 1880 and 1970. This phase is divided into three parts: period 1 (1880s-1890s), period 2 (1919-1939), and period 3 (1945-1970). During the first period firms in the industry began to first formulate capability development alternatives, whereas during the second and third period the different options were employed. The section then reflects on the strategic response of the DJI to the growing competition from the Indian industry since the late nineteenth century and the industry's decline in general. The fourth section underlines the major findings of the research and emphasises their importance for theoretical development in the capabilities literature. The role of path dependency has been acknowledged also in influencing organisational foresight. Hence, this section outlines key implications arising out of the empirical case for research on organisational foresight. 4 2.0 Path Dependency and Application of History in Capabilities Approach 2.1 Path dependency and Strategic Capabilities The significance of path dependency in resource commitment was established by David (1985) and Arthur (1989). David argued that in order to understand the 'logic or illogic world around us'; it is necessary to understand 'how it got that way' (p. 332). He examined the case of the continued preference of the 'QWERTY' over the 'DSK' format for setting keys on typewriters and computers, when it was demonstrated that the latter form was more efficient than the former. He argued that the combination of three conditions led to this preference: first, the technical interrelatedness of system components, such as typists and keyboards; second, increasing returns, as in the greater value of keyboard systems with larger market shares; and third, quasi-irreversibility of investment, as in the costs of switching from one keyboard system to another owing to 'learning and habituation' (p. 336). Building on this framework, Arthur emphasized the importance of increasing returns of scale that developed over time and suggested that these can be derived from both the demand and supply-side. On the supply side the result of learning effects (learning by doing or learning by using), which lower the cost or...