Part VI From Organizational Investment to Strategic Reorientation: From Resource-Based Negotiating Asymmetry to Path-Dependent Structural Change in Larger Systems

Abstract

Part V examined how selective and sustained investment across functional domains within an organization may produce unequal accumulated organizational capacity and, consequently, unequal potential negotiating capacity among those domains. Part VI extends the underlying structural relationship to a larger level of organization without treating the state as an enlarged organization or transferring organizational terminology directly to it. At the systemic level, the relevant processes are expressed through strategic investment, sectoral specialization, accumulated capabilities, industrial development, technological capabilities, and structural change. Economic and evolutionary research suggests that historical investments and accumulated capabilities can influence subsequent trajectories of specialization and diversification. The resulting path dependence does not imply that systems are permanently locked into previous choices. Rather, accumulated capabilities may alter the relative difficulty, cost, and feasibility of entering domains that differ substantially from those in which capabilities were previously concentrated. Research on path creation and path-defying diversification further demonstrates that new trajectories can emerge despite established developmental paths. Part VI therefore proposes a narrower extension of these literatures: when strategic importance shifts from an established domain toward a substantially different domain, the accumulated concentration of investment and capabilities in the previous domain may affect the system's potential capacity for strategic reorientation. This proposition is explicitly non-deterministic. Historical specialization does not make transition impossible, nor does it establish that previous investment was irrational. A previously rational investment trajectory may nevertheless create conditions that make subsequent cross-domain reorientation more difficult when future demand changes in kind rather than merely in magnitude. The central problem is therefore not whether a system has invested sufficiently, nor whether it possesses adequate information about a newly emerging domain. The problem is whether accumulated capabilities built around one domain can be reorganized when the domain demanded by the future changes. This version includes an illustrative case study — Kodak's transition from chemical to digital imaging — situating the paper's structural proposition against a documented instance of organizational reorientation difficulty.