Short-term profit maximization locks a booming industry into a self-reinforcing downward path

Evidence

Opportunistic behavior of the entrepreneurs in the ‘golden age’ of the Istanbul cluster (corresponding to a period from the late 1950s to the early 1970s), for instance, meant that enormous funds gained were not invested in infrastructure for the development of the industry, but, instead, used for shooting more and more films in an attempt to fully exploit the boom. The long-run consequences of this strategy were, however, severe: the path the cluster entered into was heading towards a cliff at full speed, which in turn reminds us that the transformation that a cluster goes through is not always progressive and that how the cluster participants respond to the challenges they face does matter. There is, in other words, a circular causality at work (Porter, 2006, p. 486) characterized by interdependence, forming the particular shape of the path that the cluster has been going through. — Georg Schreyögg and Jörg Sydow, The Hidden Dynamics of Path Dependence, 845

Categorization

• DEEPTHINKING: The reframe that path dependence is not inherently progressive — reinvestment versus extraction determines whether a lock-in ascends or collapses — is a genuinely portable structural insight.