Organizational Performance and Path Dependence - Essay Example

Running Head: Organizational Performance and Path Dependence Organizational Performance and Path Dependence of Organizational Performance and Path Dependence Introduction Globalization and technology have been powerful tools that have radically altered the business environment. They have given rise to new concepts and ideas which enhance our understanding of firm performance. Path dependence has been emerging as new concept in business studies. It has been used as a tool to explain the performance of business organizations. Path dependence involves the assessment of past choices which can lead to superior options in the current situation. The benefits of path dependence are that it enables the organization to achieve efficiency and effectiveness. It can also lead to the successful adaptation of experience and technology in the workplace. Business organizations need to apply innovation and creativity in order to accomplish their business and organizational goals. They also need to have appropriate processes that can respond effectively to the changes in the business environment. Path dependency has been associated with an increase in organizational performance. This report will seek to identify and assess the impact of path dependency in augmenting organizational performance. The report provides an overview and background about the definition of path dependency. It describes the relationship between path dependency and business firms. The characteristics of path dependency are explained using relevant theories. The strengths and weaknesses of path dependency approach are elucidated in a smart and prudent manner. Finally the paper concludes that path dependency can significantly enhance the firm performance in many ways. Path dependence Path dependence has been defined as the impact of past choices on existing options. It creates the structural framework for an association between efforts and results. The results are reliant upon the choices completed at the feedback phase. However in reality, path dependence has an intricate and complex definition (Mazzucato, 2002: Pg 250). It can involve a scenario where existing choices are constrained because of earlier alternatives. Another situation can occur when earlier judgments are simply part of multiple variables which impact the ability of organizations to choose alternatives. Path dependencies are an integral nature of organizational innovation and change. At the basic level, organizations might make decisions that are not limited by path dependency. However this can restrict the ability of organizations to pursue future alternatives in a smart and prudent manner. Path dependence emerges from a number of causes. If certain policies provide efficiency and effectiveness, business organizations will become path dependent. The widespread implementation of policies leads to its espousal by other business organizations (Mazzucato, 2002: Pg 244). Also business procedures that enable opportunities to acclimatize to knowledge and awareness can also make organizations path dependent. Historically business organizations tend to focus on a specific course instead of implementing greater substitute. Organizations need to focus on efficiency and effectiveness. They need to devise robust and flexible initiatives in order to accomplish business and organizational goals. Business firms and Path Dependency Industrialization and capitalism have given rise to the concept of industrial firms. The attributes of such firms are that they provide products and services to consumers. This entails the process of developing robust and appropriate business strategies. Large firms are able to pursue path dependence since they are not regulated or hindered by the dynamics of the business environment. The industrial firm can make strategic business plans which seek to improve productivity and output. Penrose argues that industrial firms are guided by the presence of centralized management system (Mazzucato, 2002: Pg 148). The upper management investigates and analyzes the business environment. They adopt a proactive approach which enables them to forecast changes in the environment. Contingency plans can be developed and enhanced in response to unforeseeable circumstances. However the rapidly changing business environment can pose a formidable hurdle to managers that rely on official policies and procedures. The management needs to conduct smart and prudent business decisions in order to arrive at appropriate conclusions (Mazzucato, 2002: Pg 149). A cutthroat environment ultimately determines the choices and options pursued by a business organization. It can utilize external and internal factors as strength or weakness based upon sound and smart management strategy. Every business organization needs to allocate and distribute resources in order to achieve competitive advantage. The external environment can create a powerful incentive to achieve change and innovation. Characteristics of Path Dependency Path dependency is a fascinating attribute of business organizations. It seeks to augment returns through the assignment of assets to prospective routes of achievement. Boost in organizational productivity is superior in terms of percentage to efforts initiated by the organization (Mazzucato, 2002: Pg 179). Mass production tends to augment the competence and efficacy of business organizations. Even consumers derive benefit and value from the enhanced productivity of organizations. In some cases path dependency might yield ineffectiveness and disorganization. Random gains can be a reality if proper strategies are implemented. Path dependence is logically generated through the permanent, inseparable, and organized exploits of agents. It allows the organizations to transform the business environment by studying the historical actions. The compelling attribute of path dependency is that it enables organizations to have stimulus to concentrate on solitary choice. This enables the organization to take a precise course of action. Teese argues that business organizations need dynamic capabilities in order to achieve superior outcomes. These capabilities assist the organization to evaluate new prospects and threats (Mazzucato, 2002: Pg 177). It also enables the organizations to modify and alter strategies as a response to fluctuations in the market. Dynamic capabilities should seek to integrate technology in the work environment. This becomes a path dependent choice for the organization. The implementation of technology enables the organization to make rapid advances inside new consumer markets. Strengths of Path Dependency The path dependency approach can be beneficial in a number of ways. Business organizations have an interlinked association with consumers that is based upon examination, opinion and appraisal. Each path selected enables firms to penetrate new markets. Small firms can emulate the behavior of large and powerful organizations. Knowledge exchange can also become a source of success for many business organizations. The dissemination of ideas helps the organization to augment its performance (Mazzucato, 2002: Pg 214). Many business organizations use a local chronological model which helps to explain the phenomenon of path dependency. Institutional practices and customs need to be adhered and complied by business firms. The learning curve compares the progress in acquiring competencies as opposed to total time taken to acquiring those competencies. This model presupposes that knowledge is acquired in the business environment through effort and exertion. Frequent exposure in the business environment can augment the process of learning and development in the workplace. This can boost the productivity and output of the business organization. At the same time operational costs also decline. The learning curve is effective if employees retain their knowledge inside the same business organization (Mazzucato, 2002: Pg 213). Turnovers and new jobs can significantly degrade the ability of organizations to gain valuable experiences and competencies. Managers need to implement diversified strategies in order to accomplish business and organizational goals. They need to ensure that smart and prudent tactics are used in the cutthroat environment. Weaknesses of Path Dependency Path dependency can create a number of constraints for the organization to achieve efficiency and effectiveness. A dynamic business organization might be limited by chaos and disorder. Impulsive and volatile business decisions can hinder the progress of the business organization. Also management might distribute resources in an inept and disorganized manner (Mazzucato, 2002: Pg 230). Another weakness is the fact that path dependency assumes a uniform and consistent description of organizational performance. It is argued that business solutions are based upon other variables. They are more likely to be constructed and developed as a response to changes in the business environment. Path dependency also claims an unlimited belief on the importance of historical decisions. It does not provide a coherent and uniform description of judgment making. Further it can explain the steadiness and constancy of business organizations. But it fails to provide valid descriptions about organization change and innovation. An organization’s ability to apply innovation for productivity depends upon the successful application of technology. In some cases partial innovation can bring out the desired change. An example of this strategy is the case study of Xerox. This organization entered the paper copier industry in the 1970s. The organization would require over a decade in order to dominate the industry. This was surprising given the technological innovations introduced by the business organization (Mazzucato, 2002: Pg 229). Path Dependence and Firm Performance Business organizations take valuable feedback and alter them into results. Once a specific blueprint for development and performance is developed, it can grow and distinguish itself with a level of path dependence. Path dependence tends to be a conditional practice which enables business organizations to pursue specific course of actions which will impact the past and present nature of business processes. Current circumstances enable the organization to apply efficiency and effectiveness. Path dependency enhances the firm performance in a number of ways. At the first level, technology with its various attributes can enhance the productivity of business organizations. It also creates tangible and intangible advantages for the organization. Technology is integrated with the various business processes in order to arrive at superior outcomes (Mazzucato, 2002: Pg 244). Further investments should maximize returns in a smart and prudent manner. The business organization also achieves experience through trial and error. Management integrates and coordinates various business activities in order to attain organizational goals. The application of innovation and creativity also helps the organization to maintain its competitive edge. Further path dependency helps to create a coherent and unified set of policies and procedures. These policies can be emulated in order to reduce or mitigate fluctuations in the business environment. Managers must be able to utilize various concepts in order to acquire specific expertise and competencies. They should be able to use multidirectional and multifaceted business strategies. Conclusion Path dependence seeks to identify the influence of past choices on existing alternatives. It provides an environment to interlink efforts and results. Industrialization and capitalism have changed the concepts of business organization. An industrial firm is described as an entity which utilizes resources in order to provide products and services. Path dependence can be beneficial because it allows the successful application of business technologies. Small firms can emulate the behavior and practices of other organizations without investing large sums of money. Efficiency and effectiveness are also enhanced in order to produce superior outcomes. Knowledge exchange becomes a powerful and robust tool for change by the business organization. However there are a number of constraints for path dependency. It might lead to the inefficient distribution of resources by the management. The desired business goals might not be achieved by the emulation of established business strategies. A dynamic business organization might be limited by chaos and disorder. Impulsive and volatile business decisions can hinder the progress of the business organization. Business organizations are path dependent for their performance. They need to have robust and dynamic strategies in order to achieve superior business outcomes. Further the management needs to have appropriate and robust strategies in order to deal with business threats. Organizational performance is enhanced through the application of path dependency. It can accomplish business and organizational goals through the application of smart and prudent strategies. It also helps to overcome limitations and constraints of resource allocations which small organizations face. References Mazzucato, M. (2002). Strategy for business. Sage Publications . Read More