ABSTRACT
In this chapter, path dependence theory is adopted as the starting point for the analysis of innovation and transitions in the economic landscape. Path dependence theory, as exemplified by Paul David (1985) and Brian Arthur (1989), seeks to explain the long-term historical development of distinctive patterns of technological and industrial forms, and how, once established, particular trajectories of technological and industrial development become self-reinforcing via various forms of externalities and increasing returns effects. For the purposes of this chapter path dependence is defined:
as a probabilistic and contingent process: at each moment in time the suite of possible future evolutionary trajectories (paths) of a technology, firm or industry is conditioned by (contingent on) both the past and the current states of the system in question. The past thus sets the possibilities while the present controls what possibility is to be explored.
(Martin and Sunley 2006: 402)