Re-examining Path Dependency in the Digital Age: A Longitudinal Case Study in the Car Industry

In the age of digitalization, incumbent firms are forced to compete with new-born digital ventures in novel spaces. Both digital entrants as well as industrial-age incumbents enter this emerging competition from different starting points: incumbents are known to be restrained by their cognitive and material path dependence to innovate, and new entrants are generally open to new technologies and able to bundle complementary products. This study examines whether the development of digital capabilities via digital business models impacts the effect of path dependence on business model evolution. Based on a multiple case study in the car industry on projects in the spaces of “Connected Cars” and “Mobility as a Service” over ten years (2007-2017), this study identifies eight business model archetypes and corresponding pathways of incumbents and new entrants. We find that the focus on digital or physical materiality, defined by the selected locus of innovation within an emerging multi-layered architecture, influences agency and pathways. We contribute by showing how path dependence in the digital age might be different from what has been known before.