Path Dependence

The concept and the QWERTY case

Path dependence gives rigorous form to the idea that "history matters." The economic historian Paul David (1985) explained that the QWERTY keyboard was designed to reduce key jams on nineteenth-century typewriters, yet even after that technical reason disappeared and the Dvorak layout, said to be more efficient, appeared, typist training, machine production and user habits reinforced one another and QWERTY persisted. A state in which early chance choices narrow later options and are hard to escape is called "lock-in." Railway gauges, electrical standards and the VHS–Betamax videotape contest are other frequently cited cases.

Increasing returns and self-reinforcement

W. Brian Arthur (1989, 1994) used probabilistic models to show that in markets with increasing returns, small early accidents are amplified so that outcomes cannot be predicted in advance and need not converge on the most efficient technology. Such processes can be described as stochastic processes in which the prior state shapes the next, much like the winner-take-more Matthew effect. Sources of self-reinforcement include large set-up costs, learning effects, network effects and Metcalfe's law, in which value rises with users, and adaptive expectations that others will make the same choice. Paul Krugman (1991) explained the clustering of industries in particular regions as a similar cumulative process, launching the new economic geography.

Extension to institutions and politics, and debate

Douglass North (1990) placed path dependence at the center of his theory of institutional change: once institutions are established, organizations and interests form around them, so even inefficient institutions can persist. Paul Pierson (2000) analyzed self-reinforcement in political institutions, and James Mahoney (2000) studied paths that become fixed after contingent "critical junctures" in historical sociology. Acemoglu, Johnson and Robinson (2001) offered empirical evidence of long-run path dependence, showing that colonial-era institutions shape today's income gaps. Liebowitz and Margolis (1990, 1995) countered that evidence for Dvorak's superiority is weak and that "strong" path dependence, in which markets are truly locked into inferior technologies, is rare. In management, Sydow et al. (2009) theorized organizational path dependence, in which firms become trapped in past formulas for success, and Vergne and Durand (2010) highlighted the methodological difficulty of testing the concept empirically.

FAQ

Does path dependence just mean "the past affects the present"?

It is narrower. The key point is that small early events are amplified by self-reinforcing processes into a locked-in state that is hard to leave even when better alternatives appear.

Is the QWERTY story accepted as fact?

It is disputed. David treated it as a classic case of lock-in, but Liebowitz and Margolis argued the evidence for the Dvorak keyboard's superiority is weak.

Sources reviewed: 2026-10-26

References

1. David, P. A. (1985). Clio and the economics of QWERTY. American Economic Review, 75(2), 332–337.
2. Arthur, W. B. (1989). Competing technologies, increasing returns, and lock-in by historical events. Economic Journal, 99(394), 116–131.
3. Arthur, W. B. (1994). Increasing Returns and Path Dependence in the Economy. Ann Arbor: University of Michigan Press.
4. North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press.
5. Liebowitz, S. J., & Margolis, S. E. (1990). The fable of the keys. Journal of Law and Economics, 33(1), 1–25.
6. Liebowitz, S. J., & Margolis, S. E. (1995). Path dependence, lock-in, and history. Journal of Law, Economics, and Organization, 11(1), 205–226.
7. Krugman, P. (1991). Increasing returns and economic geography. Journal of Political Economy, 99(3), 483–499.
8. Mahoney, J. (2000). Path dependence in historical sociology. Theory and Society, 29(4), 507–548.
9. Pierson, P. (2000). Increasing returns, path dependence, and the study of politics. American Political Science Review, 94(2), 251–267.
10. Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development. American Economic Review, 91(5), 1369–1401.
11. Sydow, J., Schreyögg, G., & Koch, J. (2009). Organizational path dependence: Opening the black box. Academy of Management Review, 34(4), 689–709.
12. Vergne, J.-P., & Durand, R. (2010). The missing link between the theory and empirics of path dependence. Journal of Management Studies, 47(4), 736–759.