koch, eisend y petermann-path dependence in decision-making processes

8/13/2019 Koch, Eisend y Petermann-Path Dependence in Decision-Making Processes

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BuR - Business ResearchOfficial Open Access Journal of VHB

Verband der Hochschullehrer fr Betriebswirtschaft e.V. Volume 2 | Issue 1 | May 2009 | 67-84

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1 IntroductionPath dependence is a dynamic theory assuming thatinitial events can increasingly restrain present and

future choices. The theory originates in the histori-cal studies of Paul David (1985, 1986) who exploredthe development of QWERTY keyboard technology.He shows how an inferior and inefficient techno-logical standard becomes established and is main-tained. Brian Arthur (1989, 1994) has highlightedthe importance of self-reinforcing mechanisms ofsuch path-dependent processes. The focus on self-reinforcing effects became the hallmark of path-dependence theory ( Arthur 1983; David 1993; Ar-thur 1994; Bassanini and Dosi 2000; Ackermann 2001). These effects are the central triggering ele-

ments that drive path dependence (Sydow,Schreygg, and Koch 2009). In addition, path-dependent processes are embedded in institutional

fields and environments which may affect the pathprocess as well (Pierson 2000). Yet little is knownabout the particular impact of context factors, suchas ambiguity, power structures, institutional densityor complexity on path-dependent processes (North 1990; Greif 1994; Thelen 2003; Pierson 2004).

2 The unexplored context of path-dependent process

The assumption that context matters in path-depen-dent processes are based on a conceptual argument.The complexity of goals, tasks, and environments in which decision makers have to operate as well as theloose and diffuse links between actions and out-comes render such settings inherently ambiguous;they are, therefore, prone to increasing returns(Pierson 2004). Context factors contribute to imper-

ath Dependence in ecision-Makingrocesses: Exploring the Impact of Complexityunder Increasing Returns

ochen Koch, Department of Management and Organization, European University Viadrina, Frankfurt (Oder), Germany,

-mail: [email protected]

artin Eisend, Department of International Marketing, European University Viadrina, Frankfurt (Oder), Germany,

-mail: [email protected]

rne Petermann, Institute of Management, Freie Universitt Berlin, Germany, E-mail: [email protected]

AbstractThe development of path-dependent processes basically refers to positive feedback in terms of increasingreturns as the main driving forces of such processes. Furthermore, path dependence can be affected bycontext factors, such as different degrees of complexity. Up to now, it has been unclear whether and howdifferent settings of complexity impact path-dependent processes and the probability of lock-in. In this

aper we investigate the relationship between environmental complexity and path dependence by meansof an experimental study. By focusing on the mode of information load and decision quality in chronologi-cal sequences, the study explores the impact of complexity on decision-making processes. The results con-tribute to both the development of path-dependence theory and a better understanding of decision-makingbehavior under conditions of positive feedback. Since previous path research has mostly applied qualita-tive case-study research and (to a minor part) simulations, this paper makes a further contribution byestablishing an experimental approach for research on path dependence.

Keywords: Complexity; Decision-making; Path dependence; Lock-in

Manuscript received December 9, 2007, accepted by Peter Walgenbach (Management) February 3, 2009
http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=David&aufirst=Paul+A.&title=The+American+Economic+Review&atitle=economics+of+QWERTY&issn=0002-8282&date=1985&volume=75&issue=2&pages=332-337http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=parker&aufirst=william&title=modern+economist&isbn=0631147993&date=1986http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=historical+small+events&date=1985http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=foray&aufirst=dominique&title=wealth+of+nations&isbn=1855670828&date=1993http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=delli+gatti&aufirst=domenico&title=interaction+and+market+structure&isbn=3-540-66979-5&date=2000http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=ackermann&aufirst=rolf&title=pfadabh%E4%AE%A7igkeit&isbn=3-16-147678-6&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=ackermann&aufirst=rolf&title=pfadabh%E4%AE%A7igkeit&isbn=3-16-147678-6&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Pierson&aufirst=Paul&title=American+Political+Science+Review&atitle=path+dependence&issn=0003-0554&date=2000&volume=94&pages=251-267http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Greif&aufirst=+Avner&title=Journal+of+Political+Economy&atitle=theoretical+reflection&issn=0022-3808&date=1994&volume=102&issue=5&pages=912-950http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=mahoney&aufirst=james&title=comparative+historical+analysis&isbn=0-521-01645-2&date=2003http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=ackermann&aufirst=rolf&title=pfadabh%E4%AE%A7igkeit&isbn=3-16-147678-6&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=ackermann&aufirst=rolf&title=pfadabh%E4%AE%A7igkeit&isbn=3-16-147678-6&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=delli+gatti&aufirst=domenico&title=interaction+and+market+structure&isbn=3-540-66979-5&date=2000http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=foray&aufirst=dominique&title=wealth+of+nations&isbn=1855670828&date=1993http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=historical+small+events&date=1985http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=mahoney&aufirst=james&title=comparative+historical+analysis&isbn=0-521-01645-2&date=2003http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Greif&aufirst=+Avner&title=Journal+of+Political+Economy&atitle=theoretical+reflection&issn=0022-3808&date=1994&volume=102&issue=5&pages=912-950http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Pierson&aufirst=Paul&title=American+Political+Science+Review&atitle=path+dependence&issn=0003-0554&date=2000&volume=94&pages=251-267http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=parker&aufirst=william&title=modern+economist&isbn=0631147993&date=1986http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=David&aufirst=Paul+A.&title=The+American+Economic+Review&atitle=economics+of+QWERTY&issn=0002-8282&date=1985&volume=75&issue=2&pages=332-337


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fect market conditions as indicated by the existence

of transaction costs. They make it difficult (if notimpossible) to apply rational decision rules in termsof neoclassical theory. Piersons argument that acontext matter goes further and refers not only tothe constitution of imperfect markets but to theeffect that context factors impact the occurrence andintensity of self-reinforcement as well (Pierson 2004).The literature on path dependence in economic,institutional, and political fields fails to provide clearevidence of what kind of impact relates to what kindof context factor. For instance, in the conceptualiza-tion provided by Arthur, self-reinforcing mecha-nisms are necessary and sufficient preconditions ofpath dependence, whereas context is taken forgranted and, therefore, kept constant. Context is notirrelevant, but is considered a fixed premise (e.g.,perfect information and the non-sponsoring rule( Arthur 1989) which frame the process). In Northsconceptualization, though, context provides a neces-sary precondition. Without imperfect markets andtransaction costs, path dependence does not occur,at least not in cases where path dependence is con-sidered potentially inefficient: If institutions ex-isted in the zero-transaction-cost framework, thehistory would not matter; a change in relative pricesor preferences would induce an immediate restruc-turing of institutions to adjust efficiently [](North 1990: 93). Finally, Pierson places more at-tention on the role of contextual influences on pathdependence in order to underline his central argu-ment of political systems being more prone to pathdependence than economic systems. While the dis-cussion of differences between political and eco-nomic systems is beyond the scope of this paper, it

is worthwhile emphasizing his basic assumptionthat also context may affect path-dependent proc-esses. Even if this assumption may be intuitivelyplausible, the conceptual and empirical evidence forthat issue is somewhat weak due to at least threeshortcomings:First, Pierson refers to context in a very broad andunspecified manner, mentioning a variety of factors,such as power structures, uncertainty, and unspeci-fied preferences that describe the context of (politi-cal) decision-making. It is plausible that these fac-tors can influence political decision-making andmay lead to inertia and rigidity. Hence, context fac-tors may provide the same explanation for outcomessuch as path dependence. They could, though, pro-

vide different, alternative explanations as well.

There may be a correlation between both factorsthat influence rigidity but not necessarily a causallink.Second, focusing on context in a broad sense makesit difficult to discern and distinguish the existence ofspecific causal relations between a concrete contextfactor and a path-dependent process. For instance,power structures and complexity are very different but nevertheless potentially interdependent con-cepts (e.g., power structures could be very complexand complexity may foster the emergence of infor-mal power structures). Referring to a broad under-standing of context may entail a lot of unrecognizedcross effects. That may finally lead to the not-falsifiable assumption that context always matters.Third, given the fact that path-dependent processesare evolutionary and contingent, path analysis isoften retrograde and provides an ex-post explana-tion only (see alsoMahoney 2000). This is espe-cially problematic for empirical studies based on asingle or just a few cases. Referring to an opaqueand highly interdependent context, it does not provide better insights into the assumed causal rela-tionship due to the threat of ad-hoc theorizing; agiven result (a path) is referred to an unspecifiedcontext which in turn is interpreted as the causalreason for that result. Another result of another caseand another posteriori interpretation of the contextare quite likely when following this research ap-proach.Considering these caveats, it seems more appropri-ate to opt for another research strategy by specifyingand providing a clear-cut research design, focusingexclusively on very few variables and the directmeasurement of their relationship. For that reason,

we focus on only one particular context factor: thedegree of complexity. We apply an experimentalapproach in order to isolate the context effect and tocontrol for possible interferences on both the con-textual level and the level of self-reinforcement.The outline of the paper is as follows: First, we givea short introduction into path-dependence theory inorder to specify our understanding of path-dependent processes. Then, we describe the contextfactor complexity by referring to complexity theoryand psychological research on decision-making.Building on these insights, we deduce our hypothe-sis and research questions which are presented inthe following section. Finally, we present and dis-cuss the results of the study.
http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Mahoney&aufirst=James&title=Theory+and+Society&atitle=Path+dependence&issn=0304-2421&date=2000&volume=29&pages=507-548http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=north&aufirst=douglas&title=institutional+change&isbn=0521394163&date=1990http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Mahoney&aufirst=James&title=Theory+and+Society&atitle=Path+dependence&issn=0304-2421&date=2000&volume=29&pages=507-548http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004


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3 Path-dependence theory

Path dependence is the outcome of a dynamic proc-ess that is reigned by one or more self-reinforcingmechanisms. According to previous research, wedistinguish between at least six different forms ofself-reinforcing mechanisms (Sydow, Schreygg,and Koch 2005, 2009): (1) economies of scale andscope, (2) direct and indirect network externalities,(3) learning effects, (4) adaptive expectations, (5)coordination effects, and (6) complementary effects. All mechanisms share the same inherent logic. Forinstance, direct network externalities imply that ausers benefits from a purchased good or serviceincrease as more users use the same good or service;purchasing and using a telephone becomes morerewarding the more users there are already usingthis device. Indirect externalities refer to comple-mentary products and services accompanying aproduct (e.g., video stores, video recorders, etc. inthe case of VHS seeCusumano, Mylonadis, and Rosenbloom 1992). Figure 1 illustrates the self-reinforcing working of both effects.

Figure 1: Direct (1) and indirect (2) network

effects

All these effects lead to positive feedback loops in which at least two variables are reciprocally linkedin the following way: a higher (or lower) level of one variable leads to a higher (or lower) level of the sec-

ond variable which in turn leads to a higher (orlower) level of the first variable and so on.From a dynamic decision-making perspective such aprocess requires a situation of repeated decisions; adecision-making system is repeatedly confronted with the same decision-making problem. Self-reinforcing mechanisms provide increasing returnsto a decision-making system for each new decision. When a decision-making system follows the emerg-ing path, the situation improves in terms of increas-ingly higher utility or increasingly lower costs of arepeatedly chosen option.There are two sides to the coin, though: A path alsoconstitutes a restriction of choice. While choices are

not restricted at the beginning of the process, ongo-

ing decision-making leads to restrictions. Decision-making systems reinforce path-building effects andat the same time the variety of choices diminish andlimitations increase. They lose sight of other dataand adopt particular decision strategies which guidethem more and more in a particular direction.It is important to note that in contrast to the com-mon understanding of dynamic decision-making(Harvey and Fischer 2005), path-dependent proc-esses do not require a direct and causal link betweenthe option once chosen and the options that will still be available to the decision maker at a later point intime. In a path-dependent process the vanishing ofpreviously available options is collateral and notnecessarily a direct or causal effect of the decisionpath.To sum up, paths are the emergent outcome of aself-reinforcing process resulting in a pattern ofaction and reflection. The development of such pat-tern is a non-ergodic process that becomes moreand more inflexible. The concrete pattern isnot

predictable at the beginning and can lead to aninefficient outcome in the end Arthur (1989, 1994);David (2001); Pierson (2004), Sydow, Schreygg, and Koch (2009) have re-conceptualized this proc-

ess in a 3-stage model (see Figure 2).Figure 2: The constitution of a path (Sydow,Schreygg, and Koch 2009)

The lager the network

The higher the utilityof the network

The more peoplewill join the network

The more complementaryproducts a network has

The higher the utilityof that network

The more people willopt for that network

The more attractive it will be toprovide complementary prod-ucts for it

(1) (2)
http://www.wiwiss.fu-berlin.de/forschung/pfadkolleg/downloads/organizational_paths.pdfhttp://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=cusumano&aufirst=michael&title=business+history+review&atitle=strategic+maneuvering&issn=0007-6805&date=1992&volume=66&issue=1&pages=51-94http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=cusumano&aufirst=michael&title=business+history+review&atitle=strategic+maneuvering&issn=0007-6805&date=1992&volume=66&issue=1&pages=51-94http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=betsch&aufirst=tilmann&title=routines+of+decision+making&isbn=0805846131&date=2005http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=garrouste&aufirst=pierre&title=evolution+and+path+dependence&isbn=1840640812&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=garrouste&aufirst=pierre&title=evolution+and+path+dependence&isbn=1840640812&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=arthur&aufirst=brian&title=increasing+returns&isbn=0472094963&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Arthur&aufirst=Brian+W.&title=The+Economic+Journal&atitle=historical+events&issn=1468-0297&date=1989&volume=99&issue=394&pages=116-131http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=cusumano&aufirst=michael&title=business+history+review&atitle=strategic+maneuvering&issn=0007-6805&date=1992&volume=66&issue=1&pages=51-94http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=cusumano&aufirst=michael&title=business+history+review&atitle=strategic+maneuvering&issn=0007-6805&date=1992&volume=66&issue=1&pages=51-94http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=betsch&aufirst=tilmann&title=routines+of+decision+making&isbn=0805846131&date=2005http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=sydow&aufirst=j%E6%B2%A7&title=the+academy+of+management+review&atitle=organizational+path+dependence&issn=0363-7425&date=2009&volume=34&issue=4&pages=689-709http://www.wiwiss.fu-berlin.de/forschung/pfadkolleg/downloads/organizational_paths.pdf


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Phase I of the model is characterized by contin-

gency. Neither is decision-making behavior undi-rected nor are choices fully unconstrained. Historymatters but in a broader sense of foregoing imprints(Boeker 1988). These imprints can lead to a narrow-ing of choices (indicated by the shadow), althoughthere always remains a considerable scope of choice.Phase I ends with a critical juncture (Collier and Collier 1991), i.e., a decision and/or event leads toself-reinforcement. At that moment, a decision-making system enters (often unconsciously) a dy-namic narrowing process triggered by positive feedback for a particular option. The system chooses theoption by chance (in the sense of a small event) orintentionally (in the sense of a bigger event). Thestrategic intent of the choice is not necessarily thetriggering of a self-reinforcing dynamic; it is ratherconsidered a collateral outcome of strategic actions.Entering into Phase II, a set of decisions is likely to be reproduced over time. If self-reinforcing mecha-nisms consolidate, a pattern of reflecting and/oracting builds up that reproduces the initial decisionor set of decisions. A dominant solution emergesand the process becomes more stable. Decisionstaken in Phase II are nevertheless still contingent,i.e., options for alternatives still exist, although theyare more and more constrained (indicated by theshadow). With the transition toPhase III, the path becomeslocked-in and the dominant pattern gains a deter-ministic character. The decision process is fully bound and a particular choice or decision patternfrom the past has become the predominant mode. Any other alternatives are ruled out even if they become more efficient. In contrast to technologicalsolutions, a behavioral pattern of acting and reflect-ing is locked-in not only when it is completely pre-determined, but also when restricted to a very nar-row area of its state space (indicated by the shadowin Phase III).The lock-in situation indicates that a path-dependent process leads to a stable and, thus, rigidoutcome which is potentially inefficient and cannot be overcome by the decision-making system. Thepotential inefficiency is caused by arationality shift ,i.e. a change in the environment that makes anotheralternative more attractive. In lock-in situations the

decision-making system is unable to switch to that

alternative1. It is very likely that a decision-making

system will not get locked-in if it becomes aware ofsuch a change in the environment during Phase II.Then, the decision-making system will switch to themore attractive solution. Yet, there is strong evi-dence from different bodies of literature that such achange does not occur, if a decision-making systemperceives the previous and present decisions assuccessful (see, for instanceMiller 1993). Thus, pathdependence implies a potential tradeoff between theinner rationality of a decision system and a secondpoint of view (an outer or observer perspective)applying another form of rationality (Koch 2008). Arationality shift is defined from the observers per-spective, but whether it is noticed and how it is per-ceived, depends on the inner rationality of the deci-sion-making system.Up to now, path-dependence research has empha-sized some pivotal elements that drive path-emerging processes in Phase II of the model andthat eventually lead to a lock-in. As described in theintroductory section, we argue that beyond thesemechanisms a particular context may encouragepath-dependent processes as well (Pierson 2004;see also Beyer 2005). We will now focus on com-plexity as such a context factor.

4 Complexity theory, decision-making and path dependence

According to Anderson (1999), complexity is astructural variable that can be equated with thenumber of different items or elements that must bedealt with simultaneously ( Anderson 1999). Com-plexity refers to the relations between elements; aninterconnected collection of elements is called com-plex when, because of immanent constraints in theelements connective capacity, it is no longer possible at any moment to connect every element withevery other element (Luhmann 1995: 24). Com-plexity also refers to decision-making systems andtheir ability to cope with situations of incompleteinformation: Complexity [] means being forced toselect (Luhmann 1995: 25). A complex environ-ment requires a decision maker to reduce complex-

1 This argument of potential inefficiency has provoked remarkablecriticism from neoclassical researchers ( Liebowitz and Margolis 1990 ; Liebowitz and Margolis 1994 ; Liebowitz and Margolis 1995 ;see also Regibeau 1995 ) because in neoclassical theory an inefficient

but nevertheless rigid solution cannot occur, and if it does occur, it isalways remediable.
http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=carroll&aufirst=glenn&title=ecological+models&isbn=0887302084&date=1988http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=collier&aufirst=ruth&title=shaping+the+political&isbn=0691078300&date=1991http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=collier&aufirst=ruth&title=shaping+the+political&isbn=0691078300&date=1991http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Miller&aufirst=Danny&title=Academy+of+Management+Review&atitle=architecture++simplicity&issn=0363-7425&date=1993&volume=18&issue=1&pages=116-138http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Koch&aufirst=Jochen&title=Schmalenbach+Business+Review&atitle=media+management&issn=1439-2917&date=2008&volume=60&pages=50-73http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Beyer&aufirst=J%EC%B2%A7en&title=Zeitschrift+f%EC%B2%ABSoziologie&atitle=impliziten+Konservatismus&issn=0340-1804&date=2005&volume=34&issue=1&pages=5-21http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=luhmann&aufirst=niklas&title=social+systems&isbn=0804719934&date=1995http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=luhmann&aufirst=niklas&title=social+systems&isbn=0804719934&date=1995http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.&title=Journal+of+Law+an+Economics&atitle=fable++keys&issn=0022-2186&date=1990&volume=33&issue=1&pages=1-25http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.&title=Journal+of+Law+an+Economics&atitle=fable++keys&issn=0022-2186&date=1990&volume=33&issue=1&pages=1-25http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.+&title=Journal+of+Economic+Perspectives&atitle=uncommon+tragedy&issn=0895-3309&date=1994&volume=8&issue=2&pages=133-150http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=liebowitz&aufirst=stan&title=Journal+of+law%2C+economics+and+organization&atitle=path+dependence&issn=8756-6222&date=1995&volume=11&issue=1&pages=205-226http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Regibeau&aufirst=Pierre&title=Research+in+Law+and+Economics&atitle=Defending+the+concept&issn=0193-5895&date=1995&volume=17&pages=33-39http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Regibeau&aufirst=Pierre&title=Research+in+Law+and+Economics&atitle=Defending+the+concept&issn=0193-5895&date=1995&volume=17&pages=33-39http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=liebowitz&aufirst=stan&title=Journal+of+law%2C+economics+and+organization&atitle=path+dependence&issn=8756-6222&date=1995&volume=11&issue=1&pages=205-226http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.+&title=Journal+of+Economic+Perspectives&atitle=uncommon+tragedy&issn=0895-3309&date=1994&volume=8&issue=2&pages=133-150http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.&title=Journal+of+Law+an+Economics&atitle=fable++keys&issn=0022-2186&date=1990&volume=33&issue=1&pages=1-25http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Liebowitz+&aufirst=Stan+J.&title=Journal+of+Law+an+Economics&atitle=fable++keys&issn=0022-2186&date=1990&volume=33&issue=1&pages=1-25http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=luhmann&aufirst=niklas&title=social+systems&isbn=0804719934&date=1995http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=luhmann&aufirst=niklas&title=social+systems&isbn=0804719934&date=1995http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Beyer&aufirst=J%EC%B2%A7en&title=Zeitschrift+f%EC%B2%ABSoziologie&atitle=impliziten+Konservatismus&issn=0340-1804&date=2005&volume=34&issue=1&pages=5-21http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Koch&aufirst=Jochen&title=Schmalenbach+Business+Review&atitle=media+management&issn=1439-2917&date=2008&volume=60&pages=50-73http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Miller&aufirst=Danny&title=Academy+of+Management+Review&atitle=architecture++simplicity&issn=0363-7425&date=1993&volume=18&issue=1&pages=116-138http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=collier&aufirst=ruth&title=shaping+the+political&isbn=0691078300&date=1991http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=collier&aufirst=ruth&title=shaping+the+political&isbn=0691078300&date=1991http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=carroll&aufirst=glenn&title=ecological+models&isbn=0887302084&date=1988


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ity in order to make decisions. People in organiza-

tions reduce a complex description of a system to asimpler one by abstracting out what is unnecessaryor minor [] compressing a longer description intoa shorter one that is easier to grasp ( Anderson 1999).Complexity impacts decision-making behavior in various ways: The first and most important implica-tion is that complexity leads to a situation where theapplication of rational decision-making models is nolonger possible or does not lead to better decisions(Simon 1987, 1990; Weick and Sutcliff 2001). As weknow from the bulk of research describing and ana-lyzing how decisions are made in organizations( Allison 1971; Cohen, March, and Olsen 1972; Petti-grew 1973; Mintzberg, Raisinghani, and Thort 1976; Beyer 1981; Brunsson 1982; March 1994;Crozier 1995; Staw 1997; Hendry 2000), rationaldecision behavior rarely occurs in the mode pre-sumed by rational choice theory: problems are ill-defined, solutions are seeking for problems, evalua-tions are implicit, etc. For that reason, the linearlogic of rational choice theory and the assumption ofrational behavior are problematic premises for bothprescribing and describing decision-making in thereal world.Due to bounded rationality, a decision-making sys-tem is unable to realize and to compute any possiblerelation between elements in complex situations.Complexity and bounded rationality are just twosides of the same coin. The limitations of the humanmind and the structure of the environment in whichthe mind operates are interlocked (Simon 1991;Gigerenzer and Todd 1999). Decision-making sys-tems in real-world settings have only limited time,knowledge, and computational capacities and,

therefore, complexity restrains the decision makerto draw inferences on the environment in order toreduce complexity.In real-world settings decision makers, therefore,rely on cognitive heuristics while processing infor-mation and making decisions (Goldstein and Giger-enzer 2002). Heuristics are an appropriate strategyfor reducing complexity. The degree to which heu-ristics are used depends on the decision-makingcontext ( stebro and Elhedhli 2006). The higherthe degree of complexity the faster and the morefrugal the heuristics have to be in order to workefficiently under such conditions (Rieskamp and Hoffrage 1999).

5 Hypothesis and research

questionsThe main assumption to be tested is whether com-plexity impacts the probability of becoming path-dependent. As shown above, this hypothesis derivesdirectly from the path-dependence literature (Pier-son 2000; 2004). In a path-dependent process suc-cessful decision-making requires the ability to detectrelevant changes (a rationality shift) while positivefeedback for a previously chosen option is still at work. Once a decision strategy is chosen and is rein-forced by positive feedback, a decision maker is lesslikely to detect relevant changes in overly complexsituations compared to less complex situations. Thedecision strategy may result in path dependence.

H1: High (versus low) complexity enhances the probability that a decision maker becomes path-dependent.

Previous research has hallmarked the role heuristicsplay in complex settings of decision-making and hasexplored which types of heuristics are applied todifferent tasks and environmental conditions (Tver-sky and Kahneman 1974; Goldstein and Gigerenzer

2002; Betsch and Haberstroh 2005; Harvey 2007).Research in the field of psychology concerning theprocess of sequential decision-making, the role offeedback, the internal and external reasons for stay-ing with a previous chosen solution, and the waycomplexity and heuristics interact provides severalexplanations for path-dependent processes (Ein-horn and Hogarth 1981; Hogarth, Gibbs, McKenzie,and Marquis 1991; Harvey and Fischer 2005; Jonas, Schulz-Hardt, Frey, and Thelen 2001; Sevdalis and Harvey 2007). Nevertheless and to the best of ourknowledge, evidence is lacking on the functionalityof heuristics under increasing returns and rational-ity shifts, as the central elements of path-dependentprocesses. Bearing in mind the purpose of this pa-per, we rely on very fundamental categories forcapturing and analyzing such heuristics and deci-sion-making processes. Besides testing the hypothe-sis of whether complexity indeed leads to path de-pendence, we further try to explorehow complexityhas an impact on path dependence. For this, werefer to basic dimensions of information which are(1) alternatives, (2) attributes, and (3) time.Previous studies have differentiated between com-pensatory (attributes are outweighed by other at-tributes) and non-compensatory (a specific attribute
http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=kagel&aufirst=john&title=advances+in+behavioral+economics&isbn=0893912182&date=1987http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Simon&aufirst=Herbert+A.&title=Annual+Review+of+Psychology&atitle=human+behaviour&issn=0066-4308&date=1990&volume=41&pages=1-19http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=weick&aufirst=karl&title=managing+the+unexpected&isbn=0787956279&date=2001http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=allison&aufirst=graham&title=essence+of+decision&isbn=0673394123&date=1971http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Cohen&aufirst=Michael+D.&title=Administrative+Science+Quarterly&atitle=organizational+choice&issn=0001-8392&date=1972&volume=17&pages=1-25http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pettigrew&aufirst=andrew&title=politics+of+organizational&date=1973http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pettigrew&aufirst=andrew&title=politics+of+organizational&date=1973http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Mintzberg&aufirst=+Henry&title=Administrative+Science+Quarterly&atitle=decision+processes&issn=0001-8392&date=1976&volume=21&pages=246-275http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Mintzberg&aufirst=+Henry&title=Administrative+Science+Quarterly&atitle=decision+processes&issn=0001-8392&date=1976&volume=21&pages=246-275http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=nystrom&aufirst=paul&title=handbook+of+organizational+design&isbn=0-19-827241-3&date=1981http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Brunsson&aufirst=Nils&title=Journal+of+Management+Studies&atitle=organizational+actions&issn=0022-2380&date=1982&volume=19&issue=1&pages=29-44http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=march&aufirst=james&title=primer+on+decision-making&isbn=0029200350&date=1994http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=masuch&aufirst=michael&title=organizational+disorder&isbn=3-11-013707-0&date=1995http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=shapira&aufirst=zur&title=organizational+decision+making&isbn=0521481074&date=1997http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Hendry&aufirst=John&title=Journal+of+Management+Studies&atitle=social+practice&issn=0022-2380&date=2000&volume=37&issue=7&pages=955-977http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=van+lehn&aufirst=kurt&title=architectures+for+intelligence&isbn=0-8058-0405-6&date=1991http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=gigerenzer&aufirst=gerd&title=simple+heuristics+that&isbn=0195121562&date=1999http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Goldstein&aufirst=Daniel+G.&title=Psychological+Review&atitle=recognition+heuristic&issn=0033-295X&date=2002&volume=109&pages=75-90http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Goldstein&aufirst=Daniel+G.&title=Psychological+Review&atitle=recognition+heuristic&issn=0033-295X&date=2002&volume=109&pages=75-90http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=%C5%B3tebro&aufirst=Thomas&title=Management+Science&atitle=Forecasting+commercial&issn=0025-1909&date=2006&volume=52&issue=3&pages=395-409http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=gigerenzer&aufirst=gerd&title=simple+heuristics+that&isbn=0195121562&date=1999http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=gigerenzer&aufirst=gerd&title=simple+heuristics+that&isbn=0195121562&date=1999http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Pierson&aufirst=Paul&title=American+Political+Science+Review&atitle=path+dependence&issn=0003-0554&date=2000&volume=94&pages=251-267http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=pierson&aufirst=paul&title=politics+in+time&isbn=0691117152&date=2004http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=tversky&aufirst=amos&title=science&atitle=judgement+under+uncertainty&issn=0036-8075&date=1974&volume=185&issue=4157&pages=1124-1131http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=tversky&aufirst=amos&title=science&atitle=judgement+under+uncertainty&issn=0036-8075&date=1974&volume=185&issue=4157&pages=1124-1131http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Goldstein&aufirst=Daniel+G.&title=Psychological+Review&atitle=recognition+heuristic&issn=0033-295X&date=2002&volume=109&pages=75-90http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aula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is not outweighed by another attribute) information

processing strategies. That is, whether a decisionmaker focuses on particular attributes or alterna-tives in order to come to a decision. Typically, ahigher amount of alternatives or attributes leads tothe increase of non-compensatory strategies wheredecision makers tend to focus on particular alterna-tives or attributes (e.g.,Billings and Marcus 1983;Payne 1976; Timmermans 1993). In path-dependentmodels, a further dimension becomes important:time (Figure 3). A decision maker has informationthat refers not only to the present, but also to thepast or even the future. A non-compensatory strat-egy in that dimension describes the focus on infor-mation related to a restricted time period. From theperspective of path-dependence theory, the investi-gation of a time dimension is of particular impor-tance since path dependence is associated with alower orientation towards the future (Miller 2002).To the best of our knowledge, this effect has not been considered in studies dealing with heuristicsand sequential decision-making either and points toa research gap in that field.

Figure 3: Dimensions of informationretrieval in path-dependent decision-making

Taken together, we distinguish between three fun-damental non-compensatory heuristics that wedescribe as a focus on alternatives (FAl)2, focus onattributes (FAt) or focus on present information(FPI). The question to be answered is:

2 All abbreviations are explained in the list of acronyms in theappendix.

RQ1: Does complexity influence the (a) focus on

alternatives (FAl), (b) focus on attributes (FAt) or(c) focus on present information (FPI) of a deci-sion maker?

Provided that these heuristics are responsible forpath dependence, they should work as a mediator between complexity and path dependence. We try toexplore whether a complexity-driven application ofthese heuristics leads to path dependence.

RQ2: Does the (a) focus on alternatives (FAl), (b) focus on attributes (FAt) or (c) focus on presentinformation (FPI) mediate the impact of com-

plexity on path dependence such that complexityimpacts (a) focus on alternatives (FAl), (b) focuson attributes (FAt) or (c) focus on present infor-mation (FPI) which in turn impact path depend-ence?

As we know from complexity theory and informa-tion-processing theory ( Anderson 1999), complexityinfluences an individual decision system concerningthe amount of retrieved information. In highly com-plex situations, it is impossible to retrieve all infor-mation available. Some authors argue that a higher

level of complexity leads to a more selective searchof information (Ford, Schmitt, Schechtman, Hults,and Doherty 1989). When time resources for mak-ing decisions are restricted, a decision maker has tospend more time on structuring the situation (e.g.,detecting what could be relevant and what could beirrelevant) and less time for retrieving information.However, a decision maker could also simplychange the strategy of information retrieval in ahighly complex situation and, thus, still be able toretrieve as much information as under low complex-ity. We formulate further research questions on thetotal amount of information retrieval (total informa-tion load (TIL)) as well as on its role as a mediator between complexity and path dependence.

RQ3: Does complexity influence the level of totalinformation load (TIL)?

RQ4: Does the level of total information load(TIL) mediate the effect of complexity on pathdependence such that complexity impacts TILwhich in turn impacts path dependence?

Information search influences the size and quality of

the consideration set of alternatives as well as thealternative that is eventually selected (Bazerman 2006). Very fast and frugal heuristics can lead to
http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=billings&aufirst=robert&title=Organizational+behavior+and+human+performance&atitle=measures+of+compensatory&issn=0030-5073&date=1983&volume=31&issue=3&pages=331-352http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=payne&aufirst=john&title=Organizational+behavior+and+human+performance&atitle=taks+complexity&issn=0030-5073&date=1976&volume=16&issue=2&pages=366-387http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=timmermans&aufirst=danielle&title=journal+of+behavioral+decision+making&atitle=impact+of+task&issn=1099-0771&date=1993&volume=6&issue=2&pages=95-111http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Miller&aufirst=+Kent+D.&title=Strategic+Management+Journal&atitle=Knowledge+inventories&issn=0143-2095&date=2002&volume=23&issue=8&pages=689-706http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=ford&auinit=J&title=organizational+behavior+and+human+decision+processes&atitle=process+tracing+methods&issn=0749-5978&date=1989&volume=43&issue=1&pages=75-117http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=ford&auinit=J&title=organizational+behavior+and+human+decision+processes&atitle=process+tracing+methods&issn=0749-5978&date=1989&volume=43&issue=1&pages=75-117http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=bazerman&aufirst=max&title=judgement+in+managerial&isbn=0471684309&date=2006http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=bazerman&aufirst=max&title=judgement+in+managerial&isbn=0471684309&date=2006http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=bazerman&aufirst=max&title=judgement+in+managerial&isbn=0471684309&date=2006http://www.digibib.net/openurl?sid=hbz:dipp&genre=book&aulast=bazerman&aufirst=max&title=judgement+in+managerial&isbn=0471684309&date=2006http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=ford&auinit=J&title=organizational+behavior+and+human+decision+processes&atitle=process+tracing+methods&issn=0749-5978&date=1989&volume=43&issue=1&pages=75-117http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=ford&auinit=J&title=organizational+behavior+and+human+decision+processes&atitle=process+tracing+methods&issn=0749-5978&date=1989&volume=43&issue=1&pages=75-117http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Anderson&aufirst=+Philip&title=Organization+Science&atitle=Complexity+theory&issn=1047-7039&date=1999&volume=10&issue=3&pages=216-232http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Miller&aufirst=+Kent+D.&title=Strategic+Management+Journal&atitle=Knowledge+inventories&issn=0143-2095&date=2002&volume=23&issue=8&pages=689-706http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=timmermans&aufirst=danielle&title=journal+of+behavioral+decision+making&atitle=impact+of+task&issn=1099-0771&date=1993&volume=6&issue=2&pages=95-111http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=payne&aufirst=john&title=Organizational+behavior+and+human+performance&atitle=taks+complexity&issn=0030-5073&date=1976&volume=16&issue=2&pages=366-387http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=billings&aufirst=robert&title=Organizational+behavior+and+human+performance&atitle=measures+of+compensatory&issn=0030-5073&date=1983&volume=31&issue=3&pages=331-352


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good decisions that even equal decisions of decision

makers who can refer to a complete set of informa-tion without any computational restrictions and without time limitations (i.e., the hyper-rationaldecision maker can transfer complexity into sim-plicity) (Todd 2007). However, it is also plausible toassume that less information undermines the qual-ity of decisions. This argument is based on the as-sumption that each additional piece of relevantinformation enhances decision quality. Highercomplexity leads to less information and, therefore,to a lower level of decision quality.

As for the impact of decision quality ofeach decision, the impact on path de-pendence is ambiguous as well. At firstglance, we may assume that a decisionmaker who is likely to make the rightdecision (high decision quality) does not become path-dependent as he recog-nizes in each situation which decision isthe best. However, the idea of increasingreturns introduces the dependency ofdecisions on previous decisions suchthat a decision maker may decide based

on experiences of a series of formergood decisions. He may become path-dependent as a result of positive feedback and inertia since he keeps the formerly bestdecision over time, although another alternative becomes preferable. The question here is whetherthe likelihood of sticking with former decisions de-pends on complexity and finally leads to path de-pendence. We, therefore, try to explore the role ofdecision quality as a mediator between complexityand path dependence.

RQ5: Does decision quality (DQ) mediate the effect of complexity on path dependence such thatcomplexity impacts DQ which impacts the prob-ability of path dependence.

If such a relationship exists, it is plausible to explorethe heuristics mentioned above as a mediator be-tween complexity and decision quality.

RQ6: Does the (a) focus on alternatives (FAl), (b) focus on attributes (FAt), (c) focus on present information (FPI) or (d) the level of total informa-tion load (TIL) mediate the impact of complexity

on decision quality (DQ) such that complexityimpacts (a) focus on alternatives (FAl), (b) focuson attributes (FAt), (c) focus on present informa-

tion (FPI) or (d) the level of total information

load (TIL) which in turn impact decision quality(DQ)?

Figure 4 summarizes the hypothesis and researchquestions and gives an overview of the relationships between the different variables to be investigated.

Figure 4: Framework, hypothesis andresearch questions

6 Method

6.1 Overview We apply an experimental design in order to test thehypothesis and to explore the research questions.The experiment is based on a one-factorial between-subjects design, manipulating the complexity of thedecision environment on two levels (low vs. high

complexity). Mobile service companies were used because student participants are familiar with buy-ing decisions for mobile services. Furthermore, thepurchase situation allows for different complexitysettings due to varying offers of information that arecommon to real-life purchase situations for mobileservices.

6.2 Participants and procedureThe experiment took place in a computer lab. Wedeveloped a software tool (ComPad Explorer) forthe purpose of the experiment. 27 students volun-teered to participate in the study (13 female, 14 malestudents; average age 22.7 years) and were ran-domly assigned to the experimental groups. Stu-

Complexity

Total Information Load (TIL)

Path dependence

Information Load

DecisionQuality (DQ)

Focus on Attributes (FAt)

Present Information (FPI)

RQ5

H1

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Focus on Alternatives (FAl)
http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Todd&aufirst=Peter+M.&title=European+Journal+of+Operational+Research&atitle=much+information&issn=0377-2217&date=2007&volume=177&issue=3&pages=1317-1332http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Todd&aufirst=Peter+M.&title=European+Journal+of+Operational+Research&atitle=much+information&issn=0377-2217&date=2007&volume=177&issue=3&pages=1317-1332


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The information settings were created in order to

provide an optimal decision path as well as the pos-sibility of a lock-in, i.e., a situation where a subop-timal decision could not be changed any more dueto budget restrictions. By this, we conceptualizedpath dependence in terms of a resource (cost)-related form of lock-in. We also define an optimaldecision by referring to the cost structure, i.e., anoptimal decision is the one with the lowest all-overcosts. Taken all costs together, a specific alternativeis superior in every decision round during thecourse of the experiment. By providing price anddemand information on the present and the nextfour decision rounds, participants are able to comeup with an optimal decision in each round. Hence,none of the decisions is a decision under uncer-tainty.In order to create a rationality shift, the superioralternative changes once in the course of the ex-periment. The optimal change from one alternativeto another alternative is in the 17th decision round. After that, participants could still change to thefavorable alternative until the 21st decision round.Thereafter, they could no longer shift (unless theyhave chosen the optimal alternative) to anotheralternative as the switching costs became too high topay the bill for the switching costs with the provided budget of 100 units per round.The change of the cost structure was mainly de-signed by altering three different kinds of costs: so-called focus costs (basic fee, costs for calls to fixedlines, and costs for calls from mobile to mobile) andso-called hidden costs (costs for WAP services), while the rest of the costs (for international calls,short messaging, and multimedia messaging) re-mained rather stable. The differentiation between

focus costs, hidden costs, and stable costs is ananalytical one and not obvious to the participants(i.e., the cost categories are not labeled as such). While focus costs were decreasing all the time,favoring Alternative A (Figure 6), the hidden costs were first quite stable and after a while increasingfor Alternative A, favoring Alternative B (Figure 7).The total costs were lowest for Alternative A untilround 17 and lowest for Alternative B in the follow-ing rounds. Alternatives C and D were dummies astheir total costs were always slightly higher (Fig-ure 8). Switching costs were increasing over time(Figure 9), leading to a resource-related form oflock-in for those who stayed with Alternative A untildecision round 20.

Figure 6: Focus costs

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Figure 9: Switching costs

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After arriving at the lab, the students were informedabout the basic idea of the experiment and wereadvised to make several consecutive purchase deci-sions for a mobile service provider from a set of fouralternative providers based on information given ona computer screen. Then they were instructed onhow to use the software. In an initial test decisionround that lasted 300 seconds they became accus-tomed to the software tool. Students were each giv-en 10 euros for participating in the study. In order to

ensure that participants were kept motivated toscreen the given information in each round, three ofthe students with the best overall result (i.e., thelowest percentage of budget used) were given anadditional 10 euros each after completing the study.

6.3 ManipulationComplexity was manipulated by providing an in-formation display matrix of the cost structure of thefour alternatives with a varying number of serviceattributes. In the low-complexity (LC) setting, in-formation was provided on costs for all calls (perminute), costs for text messaging (per unit), andcosts for WAP services (per minute). In the high-complexity (HC) setting, costs for all calls were splitup into basic fee, costs for calls to fixed lines (perminute), costs for calls from mobile to mobile (perminute), and costs for international calls (per min-ute). Furthermore, costs for text messages (per unit) were split up into costs for two service attributes inthe HC setting: costs for text messages (per unit)and costs of multimedia messages (per unit). Alto-gether, the LC setting provides an information dis-play matrix of four alternatives by three attributes, while the HC setting provides a matrix of four alter-

natives by seven attributes. Figure 10 shows the

information display matrices of both settings.Figure 10: Manipulation of complexity

The data was designed in a way that every alterna-tive is based on exactly the same cost structure in both the LC and the HC setting, and the sum of thesplit-up costs in the HC setting were equal to thecorresponding costs in the LC setting. This designimplies that using the same alternative in both the

HC and the LC setting will result in the very sametotal costs. In a pretest, 50 students were asked to evaluate thecomplexity of both information settings on a 9-pointcomplexity scale. The information situation withless information was evaluated as significantly lesscomplex than the alternative information setting(t = 2.228, p = .031).It is important to note that we apply a subjectiveperspective of complexity. The participants in theexperiment are unable to connect all relevant ele-ments and notice all relations between elements, while an external observer (without time con-straints) could do this. The rational actor provides apoint of reference that helps us to establish and to

Low-complexity setting Alternatives

Attributes 1 2 3 4

Costs for calls (per minute)

Costs for text messaging (per unit)

Costs for WAP services (per minute)

High-complexity setting Alternatives

Attributes ( p.m.=per minute ) 1 2 3 4

Basic fee for calls

Costs for calls to fixed lines p.m.

Costs for calls to mobiles p.m.

Costs for international calls p.m.

Costs for text messaging p.u.

Costs for multimedia messaging p.m.

Costs for WAP services (per minute)


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design an optimal path. We introduce a time limit

that allows us to manipulate complexity (see alsothe final limitations section).

6.4 Dependent variablesThe dependent variables were path dependence,decision quality (DQ), and information retrieval interms of focus on alternatives (FAl), focus on attrib-utes (FAt), focus on present information (FPI), andtotal information load (TIL). Path dependence was measured by a dummy vari-able that distinguished between choosing the opti-mal alternative in the last round versus choosing anon-optimal alternative. Participants who ended up with a choice for a non-optimal alternative in thelast round are path-dependent since the switchingcosts are higher than the available budget. They arelocked to the chosen alternative. DQ was measured by dummy variables, indicating whether participants were choosing the single bestalternative in a decision round or not. For each par-ticipant and for decision rounds 1 to 20 (where par-ticipants were still able to choose without beinglocked-in) we assigned either 0 (wrong alternativechosen) or 1 (best alternative chosen) as value forthe variable. The sum of the values of each round(i.e., the number of choices for the single best alter-native in round 1 to 20) was used as a measure ofdecision quality.Using log-file analysis, we were able to track the whole process of information retrieval by each par-ticipant over all 25 decision rounds. An informationunit is defined as the retrieval of one piece of infor-mation, i.e., each access to a particular piece of in-formation on the screen (e.g., WAP costs for alterna-tive 1 in the present round).

FAl and FAt are analyzed by showing how much thedistribution of information load deviates from aneven distribution which would represent informa-tion retrieval of a rational decision maker. For in-stance, an even distribution over the four alterna-tives would lead to 25% of units of information peralternative. Deviations from this pattern indicatethat an information seeker tends to focus on infor-mation on a particular alternative at the expense ofinformation on other alternatives. We analyze the(in) equality of distribution by calculating Gini coef-ficients. The coefficient is defined as a ratio with values between 0, which corresponds to perfectequality, and 1, which corresponds to perfect ine-quality (Gini 1921).

FPI was measured by the ratio of information re-

lated to the present rounds to all information that was retrieved per round.TIL is the sum of all information units retrieved perround.

7 Results

7.1 Hypothesis 1The results confirm the overall impact of complexityon path dependence. While all but one of the par-ticipants in the LC setting have switched to the fa- vorable alternative within 25 rounds, only two par-ticipants of the HC setting succeeded in switching.The probability of lock-in differs significantly be-tween both groups ( 2 = 16.385, p < .001), support-ing hypothesis 1.

7.2 Research questions 1 and 2 FAl does not differ between both complexity settings(G LC = .039 vs.G HC = .095, t = 1.579, p = .127). FAt reveals Gini coefficients that show a significantdifference between both complexity settings (G LC =.044 vs.G HC = .249,t = 5.134, p < .001): information

distribution over attributes in the LC setting is moreequal than in the HC setting. FPI differs between both groups considering infor-mation related to the present decision round andinformation related to future decision rounds. Par-ticipants in the LC situation show less FPI thanparticipants in the HC setting ( M LC = .361 vs. M HC =.685; t = 3.633, p = .001).Hence, as a response to research question 1, wefound that complexity leads to an enhanced focuson attributes and on information related to the pre-sent. A mediation test procedure that considers categori-cal variables was applied (Baron and Kenny 1986;MacKinnon, Fairchild, and Fritz 2007) in order totest the influence of complexity on path dependencemediated by FAl , FAt , and FPI .The mediating effect of FAl is not supported as thereis no effect of complexity on FAl which is a neces-sary condition for a mediation effect. FAt does not function as a mediator, as the mediat-ing variable is not significantly related to path de-pendence when both complexity and the FAt arepredictors of path dependence (b = 7.314,se = 5.314,Wald = 1.895, p = .169).
http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Gini&aufirst=+Corrado&title=The+Economic+Journal&atitle=Measurement++inequality&issn=1468-0297&date=1921&volume=31&pages=124-126http://www.digibib.net/openurl?sid=hbz:dipp&genre=article&aulast=Gini&aufirst=+Corrado&title=The+Economic+Journal&atitle=Measurement++inequality&issn=1468-0297&date=1921&volume=31&pages=124-126


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FPI does not function as a mediator to path depend-

ence, as the mediating variable is not significantlyrelated to path dependence when both complexityand FPI are predictors of path dependence(b = 2.164,se = 2.846, Wald = .578, p = .447).Taken together, none of the heuristics works as amediator for the direct effect of complexity on pathdependence.

7.3 Research questions 3 and 4The data shows an overall tendency such that par-ticipants in an LC environment retrieve more in-formation, although the difference between bothexperimental groups reveals only marginal statisti-cal significance using a two-sided test ( M LC =791.583 vs. M HC = 610.800; t = 1.722, p = .097). Thispattern is rather consistent when comparingTIL foreach decision round (see Figure 11).TIL does not function as a mediator, as the mediat-ing variable is not significantly related to path de-pendence when both complexity andTIL are pre-dictors of path dependence (b = .001, se = .002,Wald = .028, p = .868).Taken together, we found only weak support for aneffect of complexity on total information load whichdoes not work as a mediator for the direct effect ofcomplexity on path dependence.

Figure 11: Total information load (TIL) perdecision round in LC versus HC settings Note: High TIL in the first round is due to the initial test decisionround that lasted 300 seconds, whereas all other rounds lasted60 seconds.

7.4 Research questions 5 and 6

Complexity impacts DQ. Between rounds 1 and 20(i.e., those rounds where participants are able toswitch between alternatives without being locked-in), participants in the LC setting come up with theright decision more often than participants in theHC setting ( M LC = 18.250 vs. M HC = 15.133;t = 2.467, p = .021). DQ is a mediator for the effect of complexity on pathdependence: regressing path dependence on bothcomplexity and DQ shows that complexity has asignificant impact on path dependence (b = -3.860,se = 1.500, Wald = 6.624, p = .010) and DQ has amarginal significant impact on path dependence(b = -.596, se = .322,Wald = 3.428, p = .064). Theeffect of complexity on path dependence is higher when dropping the mediator (b = -4.270,se = 1.291,Wald = 10.931, p = .001) which indicates partialmediation (Baron and Kenny 1986).Do FAl , FAt , and FPI mediate the effect of complex-ity on DQ? The mediating effect for the FAl is notsupported as there is no direct effect of complexityon FAl .There is no mediation effect for the FAt as the effectof the Gini coefficient in the regression model where both complexity and the Gini coefficient are used aspredictors is not significant (b = 8.785, se = 6.202,t = 1.416, p = .169).However, FPI which depends on complexity asshown above fully mediates the effect of complexityon DQ: Regressing DQ on FPI and complexity reveals a significant effect of FPI (b = -7.186,se = 2.487, t = 2.889, p = .008) but a non-

significant effect of complexity(b = -.785, se = 1.373,t = .572, p = .573).

Regressing DQ on TIL andcomplexity reveals marginalsignificant effects for bothpredictors (complexity: b =-2.368, se = 1.280,t = 1.849, p = .077 andTIL: b = -.004, se =.002, t = 1.795, p = .085). Theeffect of complexity on DQ ishigher when dropping themediator (b = -3.117, se =1.263, t = 2.467, p = .021).However, such mediationeffects should be interpreted with caution as complexity has

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only a marginal significant effect onTIL as shown

above (t = 1.722, p = .097).Taken together, we found that complexity impactsdecision quality which influences path dependence.The focus on present information works as a media-tor such that complexity leads to increased focus onpresent information which in turn reduces decisionquality. There is also weak support for partial me-diation of total information load as a mediator be-tween complexity and path dependence.Figure 12 summarizes the confirmed hypothesis andthe influence of the other variables which were con-firmed by our analysis.

Figure 12: Frame

koch, eisend y petermann-path dependence in decision-making processes

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