Abstract
Theories of path dependence and incumbent inertia assume that self-reinforcing mechanisms lead to highly persistent and eventually inefficient institutional solutions. The resulting lock-in is likely to threaten the viability of an organization. While path dependence theory was initially developed as a market-based approach, it has more recently been transferred to institutional settings and in particular to hierarchies. Some critics doubt, however, its applicability to hierarchical organizations. The major argument states that asymmetric power structures in organizations differ significantly from symmetric coordination modes and autonomous evolutionary dynamics. Hierarchical authority is assumed to be stronger and to rule out emergent autonomous dynamics. This reasoning raises the question whether hierarchical structures are actually strong enough to suppress (deliberately) the power of evolutionary self-reinforcing organizational dynamics, or vice versa. To our knowledge, there are no studies to date examining in detail these reverse dynamics. In this paper, we build on simulations to study these competing dynamics and possible conditions that favor one view or the other. We suggest using agent-based simulation and modeling, conceiving of institutional change as an interdependent multi-level process that can be analyzed numerically. The results indicate that in most situations self-reinforcing organizational dynamics can actually overrule hierarchical authority, whilst in some other situations formal authority proves to be stronger.
Highlights
Agility and adaptability feature prominently in the current managerial discourse (Eisenhardt and Martin 2000; Reeves and Deimler 2011; Worley et al 2014)
For the remainder of the paper, we study these two rivaling forces in a context that is important for understanding the dynamics of organizational path dependence (David 1994): the process of adopting or rejecting new institutional solutions in an established organization or a cluster of organizational rules
We first present the main results that address the question whether self-reinforcing processes can prevail in hierarchical organizations and lead to path dependence
Summary
Agility and adaptability feature prominently in the current managerial discourse (Eisenhardt and Martin 2000; Reeves and Deimler 2011; Worley et al 2014). An increasing number of studies highlight opposing conditions: impediments, inertia, and the inability to adapt to a changing environment (Tripsas and Gavetti 2000; Danneels 2011; Stieglitz et al 2016; Eggers and Park 2018) These are unintended phenomena resulting from emergent, evolutionary social dynamics. Developed to explain the puzzling persistence of inefficient standards in technology markets (David 1985; Arthur 1989; Cusumano et al 1992; Fouquet 2016), path dependence has recently been increasingly applied to inert phenomena in organizations such as strategic decision making, staff selection modes, organizational design policies, and persistent rule preferences. The fundamental question arises whether evolutionary, selfreinforcing processes can take over the regime in formal organizations against the hierarchical order
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