Path-Dependence: A Managerial Hermeneutic


Silkunas, Steven   (1998, ASQ)   SEPTA, Philadelphia, PA

Annual Quality Congress, Philadelphia, PA    Vol. 52    No. 0
QICID: 10706    May 1998    pp. 349-354
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Article Abstract

Path dependence is an economics technique that analyzes outcomes. It is linked to three factors: technical interrelatedness, economies of scale, and quasi-irreversibility of investment. The technique can be integrated with hermeneutics, which is the study of interpretation of events, especially those that are historical. When combined, hermeneutics and path dependence can be used to analyze corporate organizational structure. In this application, the three path dependence factors are: internal organization, managerial class, and selection of organizational structure. In the taxonomy of organizational structure there are five types: traditional, inverted pyramid, matrix or cross-functional, virtual, and circle. A case study of General Motors (GM) by Peter Drucker found GM to be the archetypical model of hierarchical and decentralized structure. From the hermeneutic path dependent viewpoint, GM has become so entrenched in its model that it cannot escape, despite experiments like the autonomous Saturn enterprise. Such analyses suggest that hermeneutic path dependence can be integrated into strategic planning and thereby give an organization the choice between the mainstream and the visionary.


Management,Economics,Case study,Organizational design

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