Geography Reference
In-Depth Information
19 Path dependence and path plasticity:
the co-evolution of institutions and innovation -
the German customized business software industry
Simone Strambach
1. Introduction
Path dependence and the co-evolution of technology and institutions are key concepts in
understanding the dynamics of structural change at the level of i rms, sectors and multi-
level spatial scales. On the research agenda of evolutionary economic geography, path
dependence appears as one of the core components, although there are unresolved issues
by its application in economic geography (Martin and Sunley, 2006, and Chapters 3 and
4 in this topic; see also Boschma and Martin, 2007, and Boschma and Frenken, Chapter
5 in this topic).
Institutional change and institutional dynamics within path-dependent developments
is one of the under-explored areas. The chapter argues that for an evolutionary approach
in economic geography there is a need to recognize and conceptualize institutional
arrangements and institutional change in greater depth. Especially for the understanding
of long-term dynamics of economies in space and time, it is necessary to make them an
integral part of the analysis and to explain how institutions play a role in dynamic devel-
opments of evolutionary paths.
The concept of path dependency is used in economic geography to explain the eco-
nomic specialization and longstanding success, as well as the crises and economically
unfavourable development of regions. The contribution of institutions, 'institutional
thickness' and the place-specii c institutional settings are made responsible for positive
lock- in ef ects and the ability of regions to adapt continually to a changing economic
environment. On the other hand, the place-specii c institutional endowment and institu-
tional inertia are also utilized to explain why some regions are victims of their past eco-
nomic success or cannot escape previous lock-ins (Grabher, 1993; Hassink, Chapter 21
in this topic). The understanding of the institutional dynamics within a well-established
technological and institutional development path of territorial settings is a central but to
a large extent also open issue (see also Maskell and Malmberg, 2007, and Malmberg and
Maskell, Chapter 18 in this topic).
In recent years, the concept of 'path creation' assumes that paths can be deliberately
created by actors if they are able to mobilize the necessary resources for the break-
through (Garud and Karnøe, 2001). Taking into account that modes of institutional
change underpin path dependency and path creation, both approaches have dif erent
perspectives. The concept of path dependency emphasizes the institutional functions
supporting continuity by stabilizing behaviour and guiding actions of actors, while the
concept of path creation focuses on the 'creative destruction' and underlines the break-
ing of institutional stability and the creation of new institutions for further innovation.
The chapter sheds light on a dif erent mode of institutional change using the notion
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