Definition of path dependence

Path dependence is the idea that decisions we are faced with depend on past knowledge trajectory and decisions made, and are thus limited by the current competence base.

In other words, history matters for current decision-making situations and has a strong influence on strategic planning. Competences that have been built in the past define the option range for today’s moves. New business opportunities, in particular those based on technological progress, emerge gradually as a consequence of competencies acquired prior to new discoveries and over time.

Example

A well-known example is the QWERTY layout for typewriters. Despite the fact that different keyboard layouts in modern computer keyboards would allow faster typing, the QWERTY layout prevails. Due to the network effect (network externalities) the layout seems immutable.[1]

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