History Matters: Path dependence and innovation in British city ...

Figure 4: Two alternative path dependence trajectories
B
Development
of industrial
sector
A
Shock
Path creation
phase
Path lock-in
phase
Path renewal
phase
Path decay
phase
Time
Trajectory A corresponds to the basic path dependence model. Trajectory B refers to a
situation where path decay is avoided and the existing path is renewed and extended.
For now, however, the lack of a generally
accepted theory of path dependence means
that there are different conceptualisations of
the term and also of the possible causes of the
establishment of new pathways. Martin (2003,
p. 29) has identified at least five different
sources of path dependence. These are:
1. Dependence on initial external chance
events.
2. Technological lock-in (Paul David).
3. Increasing returns (Brian Arthur).
4. Institutional hysteresis (Douglas North,
Mark Setterfield).
5. Social embeddedness.
A critical issue in explanations of path
dependence is why and how new pathways
get started. In much of the path dependency
literature the emergence of novelty and new
pathways is said to be accidental. Although
new developments such as the discovery of
penicillin or the inspiration for Silicon Valley
were partly chance events, reliance on random
chance is not generally a good enough
explanation for the creation of new pathways.
It offers little explanation, since after the initial
chance the rest is merely descriptive history.
Martin and Sunley (2006) suggest five possible
reasons for the start of new pathways in
particular (urban and regional) economies.
These are:
1. Indigenous creation.
2. Heterogeneity and diversity.
3. Diversification into technologically related
industries.
4. Upgrading of existing industries.
5. Transplantation from elsewhere (Martin and
Sunley 2006, p. 420).
The first four of these meet the criteria of
evolutionary systems while, strictly speaking,
the transplantation of innovation and novelty
from elsewhere does not.
Most work, particularly by economic
geographers has focused on the first of these
path creation mechanisms – indigenous
creation. Here the organisation of the
production and transfer of new knowledge is
the key element in the establishment of new
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