THe Effect of Path-Dependence and Uncertainty On the Value of Mature Technologies

Abstract

This paper examines whether technological advances benefit more from path-dependent or path-creating capabilities. Consistently with recent advances in the literature, we argue that multiple technological trajectories can coexist in a field; therefore, firms may contribute to technological development by recombining in novel ways the capabilities that are widespread in the field, or by building novel and rare capabilities. The paper also conceptualises how technological uncertainty affects the value of such capabilities. Using patent data from 1977 to 2007 for firms developing the hydrocracking technology, the paper finds that both rare and widespread capabilities are valuable to the invention process, thereby suggesting that both path-dependent and path-creating strategies are beneficial for technological development. The paper shows that uncertainty has an inverted U-shaped effect on invention value. In particular, under conditions of low uncertainty, path-dependent capabilities tend to be more valuable.