Path Creation: The Sole Viable Method for Overcoming Path Dependence

Path dependence is a phenomenon we touched upon previously when discussing “symmetry breaking.” It refers to situations where a state of affairs, formed by some historical contingent factors, may now appear extremely unreasonable, yet is difficult to change because it has been widely accepted.

For instance, that terribly off-key university anthem, the universally loathed system at your company, the highly inefficient approval processes within an organization, and the QWERTY keyboard—often cited as an example of path dependence, whose merits are still debated today… They may not all be equally bad, but they are all equally difficult to replace.

Our instinctive reaction is often to tear down and rebuild: as the saying goes, “out with the old, in with the new,” so why not make a clean break and innovate completely?

However, this is merely the logic of tidying a warehouse—if you don’t throw out the old sofa, the new one certainly can’t come in. But companies, families, and societies are not warehouses; they are complex systems in operation. The rules of complex systems are precisely the opposite—

The new must come first, for the old to then depart.

The core conceptual tool introduced in this article is “path creation.” This is perhaps the only feasible way to break path dependence.

The Nature of Path Dependence: A Reinforcing Loop #

Let’s analyze this using feedback loops. Not all legacy issues are called path dependence. Some are just ordinary inertia, changeable with a single word from a leader. True path dependence is always a “reinforcing loop”—

The more the old path is used, the more advantageous it becomes; the more advantageous the old path is, the more people use it.

Reinforcement comes from two aspects. On one hand, naturally, there are vested interest groups: they rely on the old path for their livelihood, so if you want to change it, they will naturally object. On the other hand, people have formed mutual dependencies on the old path.

For example, if your company’s software system is terrible and everyone complains daily, why isn’t it replaced? Go ask each department one by one—

The finance department says, “Of course we want to change it, but all the procurement documents are in the old system. If they don’t switch, our switch would be pointless.” The procurement department says, “We’d like to change, but hundreds of suppliers interface according to the old system’s format. Why should they go through the trouble for you?” The IT department says, “We already selected a new system, but the business departments are afraid to shut down for the switch. Who will be responsible if something goes wrong?”

In this situation, even though no one champions the old path, it remains a “multilateral” dilemma, making it difficult to coordinate a synchronized replacement for everyone.

The long-term persistence of bad things is not even due to bad people; this is what’s truly meant by being “deeply entrenched and hard to reverse.”

Then new employees join and are trained on the old system; new projects are initiated following old processes; new budgets are allocated to old lines; new clients sign old contracts. As long as this new “flow” continues to enter the old path daily, you will inevitably become more dependent on it day by day.

The correct solution is not to dismantle the old road, but to build a new one.

Principles and Methods of Path Creation #

The term “path creation” originates from two management scholars, Raghu Garud of Penn State’s Smeal College of Business and Peter Karnøe of Copenhagen Business School, who co-edited a 2001 book titled Path Dependence and Creation [1]. The book aims to challenge deterministic views of path dependence.

Garud and Karnøe argue that people are not prisoners of history: actors within old structures can fully engage in “mindful deviation”—that is, strategically deviating from the old system’s original logic while leveraging its resources, joining forces with like-minded individuals, and through iterative experimentation, to buy time for new things to grow, eventually “forcing open” a new path.

Garud and Karnøe explained how new paths emerge from nothing. Subsequent organizational research further points out that to achieve “path breaking”—i.e., unlocking the old path—the minimum standard is to disrupt its self-reinforcing mechanisms and reopen the once locked-down space of choices [2]. A 2023 empirical study also further confirmed that creating new paths can indeed effectively break old ones [3].

We refine this principle into an actionable method, comprising three core actions: building the path, diverting traffic, and retiring the old.

Step one: “Building the Path.” The core lies in not directly confronting the old path, but quietly forging a new one first.

The new path must be a complete small system, rather than a patch on the old system, so that it can develop and grow independently.

The new path needs to coexist with the old path for a period. This is not a compromise, but to achieve three key objectives: First, to keep a fallback option, allowing for reversion if the new path doesn’t meet expectations; Second, to give the new path an opportunity to iterate and grow in real-world practice, as true capabilities are rarely forged in a greenhouse; Most importantly, to learn—the old system, though sometimes seemingly clumsy, may secretly perform many unarticulated functions. A hasty demolition might hit a “load-bearing wall,” and only by running in parallel for a period can its true core support structure be identified.

Step two, and the most crucial one, is “Diverting Traffic.”

Reform’s primary battle is not over existing resources, but over the direction of new resources.

Simply put: old ways for old people, new ways for new people. Existing employees can keep old contracts, but all new employees must use the new system. Old clients can continue with old products, but all new clients onboard onto the new platform. Old data remains in the old database, all new data is written to the new database. Existing stock can be gradually digested, but the old system is not allowed to reproduce.

Step three: “Retirement.” Once people have developed a dependency on the new path, the old path can be shut down item by item.

The sequence is to first freeze new functionalities, then stop onboarding new users/personnel, then reduce it to maintenance-only, then to read-only, and finally, formally shut it down.

The entire process greatly resembles a heart bypass surgery. If a coronary artery is blocked, doctors don’t remove the old vessel; they first attach a bypass to reroute blood around the blockage, continuing flow to the heart muscle. In fact, the human body does this itself. If a coronary artery slowly narrows, the surrounding tiny blood vessels, originally very fine, may gradually enlarge to preemptively share the blood supply—this is called “collateral circulation” [4].

As long as the new can be successfully established, when the old departs is no longer important.

Diverting Traffic: The Core Strategy of Path Creation #

Why is diverting traffic crucial to path creation? You do not touch anyone’s existing stock—the old path continues to operate as usual, without even needing to declare it “wrong.” This minimizes resistance and conflict during reform.

As mentioned earlier, American economist Mancur Olson, in his book The Logic of Collective Action, discussed the deadlock of reform [5]: The benefits of reform are dispersed among the majority, but the gains per individual are so thin that no one will charge for it—yet the losses from reform are concentrated among a few. These vested interests are tightly organized and will resist fiercely.

Supporters are numerous but dispersed, opponents are few but resolute, thus reforms often end in deadlock and failure.

Path creation, however, reverses this asymmetry! Once the new path begins to operate, it acquires its own employees, clients, suppliers, and investors—a new, organized, and invested group of beneficiaries. Reform then has its own “vested interest group.”

You don’t need to convince all opponents; you just need to create enough supporters.

Another key point of path creation is that the new path must be a complete system, a “minimum viable ecosystem”: with its own people, necessary authority, independent budget, and its own processes and metrics.

Many organizations have experimented with various “pilot programs”: innovation centers, reform experimental zones, youth shock brigades—but new teams are still assessed by old metrics, use old approval processes, rely on old departments for resources, and lack their own budgets and users. If the old system stops providing support, they die. How can that work?

Historical Cases: The Wisdom of Path Creation #

Let’s look at a few successful cases from ancient and modern times, both Chinese and foreign.

First, let’s consider the Song Dynasty. During the chaotic Five Dynasties period, the rule of the game was that whoever commanded the strongest military became emperor. Zhao Kuangyin himself rose to power through a military coup, and he understood better than anyone that this path could not continue. “Relinquishing military power over wine” was about buying out the vested interests of old generals with wealth and status. But what about new people in the future? If the military commanders still called the shots, the emperor’s position would remain unstable.

The Zhao family’s solution was to create a new path of advancement for the nation’s ambitious individuals: the Imperial Examination system.

The Imperial Examination was not a new invention of the Song Dynasty, but Emperor Taizong of Song expanded the system from selecting twenty to thirty scholars per examination to several hundred, with over five hundred successful candidates in a single sitting in the second year of Taiping Xingguo (977 AD), who were immediately granted official posts [6]. The most ambitious people in the empire thereafter shifted their bets, abandoning military careers for civil service.

Consequently, decades later, the ruling elite underwent a complete overhaul. The values of “strong military and powerful horses” revered during the Five Dynasties period were replaced by the new maxim: “He who is proclaimed zhuangyuan outside Donghua Gate is a true hero”… And what threat could scholars pose to the state?

Next, consider the birth of modern science. You might assume the scientific revolution should have happened in universities, but until the 17th century, Oxford and Cambridge were still annotating Aristotle and taught no scientific experimentation at all.

It was in 1660 that a group of experimental enthusiasts in London self-established a club called the Royal Society, creating the first scientific community. They had their own network, established experimental standards, published journals, and attracted Europe’s best minds to submit their finest work to it, rather than to universities [7]…

It wasn’t until 1851 that natural sciences entered Cambridge’s formal examination system.

Then there’s the story of the shipping container. In 1956, trucking entrepreneur Malcom McLean developed the first standardized shipping container system. The convenience of container shipping was overwhelmingly clear: goods were loaded into uniform steel boxes, trucks drove them to the dockside, they were hoisted onto ships, and off they went. At the time, manually loading one ton of bulk cargo cost $5.83, while using containers cost only $0.16 [8].

However, dockworkers had vested interests. New York’s docks had centuries of accumulated trades, customs, and vested interests; you couldn’t talk to them about reform.

McLean’s approach was to build an entirely new set of docks in New Jersey, designed solely for containers. The old docks continued as before… while the new docks, with astonishingly low costs, gradually siphoned away cargo owners and shipping routes.

New York’s old docks didn’t lose a single negotiation, nor were they forcibly shut down by anyone; they simply watched as fewer and fewer ships arrived, losing their reason for existence.

The container revolution wasn’t achieved by reforming the old docks; it grew by bypassing them.

China’s Reform and Opening Up: A Textbook Example of Path Creation #

Another case is China’s Reform and Opening Up. This was a textbook example of path transformation, and it was executed on the largest system in human history.

The planned economy was one of the deepest path dependencies on Earth at that time. It wasn’t a single policy, but an entire set of interlocking gears: unified purchase and distribution gripped ration coupons, ration coupons gripped household registration (hukou), hukou gripped work units (danwei), and work units gripped your employment, housing, healthcare, and children. Each part locked into others; if you touched one, you had to touch five others first. How could you reform it?

The approach of the Soviet Union and Eastern Europe was “shock therapy”: essentially tearing down and rebuilding, opening up overnight—and everyone saw the results.

China did not do that. Looking back, none of these leviathans—the people’s communes, unified purchase and distribution, ration coupons, planned prices—were directly confronted and overcome. They were indeed abolished later, but each was abolished only after its substance had been drained away.

All changes occurred on the increments.

First, let’s look at path building. In 1979, the Guangdong Provincial Party Committee proposed establishing export processing zones, and Deng Xiaoping said, “We can designate an area, call it a special economic zone. The central government has no money, but it can give you some policies; you yourselves go and do it, carve out a bloody path” [9]. Notice: it wasn’t about breaking into the old city, but breaking out—building a new city beyond the boundaries of the old system. Shenzhen was a clearly delineated small space with a complete set of new rules.

Next, consider diverting traffic. How was the rural household responsibility system implemented? “‘Deliver enough to the state, keep enough for the collective, and what’s left is your own’ [10].” The first two clauses represent existing obligations: not a single grain less than the planned procurement. The third clause pertains to the allocation of increments: output exceeding the plan enters the market and belongs to the farmers themselves. Unified purchase and distribution was not abolished, nor was there direct confrontation with the state plan; it merely redirected the destination of the increments—and thus the floodgates of motivation opened for hundreds of millions of farmers.

Then, township and village enterprises (TVEs) purely grew outside the plan: they were not part of the state plan, nor did they occupy state investment, yet in over a decade, they absorbed hundreds of millions of rural laborers. Even Deng Xiaoping said that the sudden emergence of TVEs was “the biggest gain we had not at all anticipated” [11].

For a long time, urban industries operated under a “dual-track price system”: steel within the plan was still at parity prices, ensuring the old system didn’t run out of “food” (resources); while increments outside the plan were traded at market prices. This approach was regarded by economists as a “reform without losers” [12].

Even the reformers themselves once wondered if the dual-track system was too slow. In the summer of 1988, the policymakers decided that a short, sharp pain was better than a long, dull ache, and moved to unify prices in one step. This was the “price liberalization attempt”—the result was a nationwide buying frenzy, with citizens queuing at banks to withdraw deposits and panic-buying everything from wool yarn, matches, and soap… The State Council quickly acknowledged the failure of the attempt [13]. They then retreated to the incremental, gradualist path and persevered—until the early 1990s, when the market track’s share had grown so large that the planned track became insignificant, only then was price unification achieved around 1992… This time, there was almost no disruption.

When reform is handled well, the retirement of old systems is this quiet. In 1993, ration coupons were successively abolished across the country [14]—a system that had been in place for 38 years, carried by every urban resident—yet the nation remained entirely undisturbed.

Because ration coupons had long since ceased to have any “flow” (usage).

The funeral of an old system should be quiet, because funerals always follow death.

People summarize the wisdom of Reform and Opening Up as “crossing the river by feeling for stones.” However, a more precise summary is: do not contend fiercely with existing stock; instead, let the increments grow.

If there’s chaos and uproar, it’s not a good reform. Deng Xiaoping didn’t even fight ideological battles; he said, “No debate is one of my inventions. No debate is to gain time to work” [15].

The Costs and Value of Path Creation #

Path creation is not a panacea, and it comes with real costs: for instance, during China’s dual-track price system, the two sets of rules—planned and market—created arbitrage opportunities for power. The “speculators” (daoye) of the 1980s were a reflection of the dual-track system. The retirement of the old path is inevitable and necessary, and we naturally hope it happens sooner rather than later, but this is always far less disruptive than the upheaval caused by tearing down and rebuilding directly.

Reforming with existing flaws is better than not reforming at all, and certainly better than revolution. Revolution creates a vacuum of order, and what often emerges first in a vacuum is not the best, but the most ruthless.

A thousand sails pass by the sunken mast; ten thousand trees blossom beside the ailing tree. This world is good because it allows old things to perish, so that new things can continuously emerge.

You don’t have to tear anything down. As long as you master the increments (new growth), time will transform from an accomplice of path dependence into your most patient demolition crew.

[A verse in praise says]

Borrowing a branch high above to perch, My dangling feet become roots, drinking from the stream. Without disturbing an inch of the old trunk’s earth, The new branch flourishes alongside ten thousand trees.

注释

[1] Garud, Raghu, and Peter Karnøe. “Path Creation as a Process of Mindful Deviation.” In Path Dependence and Creation, edited by Raghu Garud and Peter Karnøe, 1–40. Mahwah, NJ: Lawrence Erlbaum Associates, 2001. https://doi.org/10.4324/9781410600370-1.

[2] Sydow, Jörg, Georg Schreyögg, and Jochen Koch. “Organizational Path Dependence: Opening the Black Box.” Academy of Management Review 34, no. 4 (2009): 689–709. https://doi.org/10.5465/amr.34.4.zok689.

[3] Stache, Florian, and Jörg Sydow. “Breaking a Path by Creating a New One: How Organizational Change Boosts Children’s Cancer Care.” Organization Studies 44, no. 3 (2023): 351–376. https://doi.org/10.1177/01708406221103965.

[4] Seiler, Christian. “The Human Coronary Collateral Circulation: Development and Clinical Importance.” European Heart Journal 34, no. 34 (2013): 2674–2682.

[5] Olson, Mancur. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press, 1965.

[6] 张希清：《中国科举制度通史·宋代卷》，上海：上海人民出版社，2015。

[7] The Royal Society. “History of the Royal Society.” https://royalsociety.org/about-us/who-we-are/history/.

[8] Levinson, Marc. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton: Princeton University Press, 2006.

[9] 丰西西、张丽红：《广东率先创办三个经济特区，改革开放“杀出一条血路来”》，广东省人民政府侨务办公室，2021 年 2 月 9 日，https://www.qb.gd.gov.cn/jrqx/content/post_316025.html。

[10] 刘伟、刘守英：《建党百年与土地制度变迁的理论和实践探索》，《经济日报》，2021 年 7 月 5 日，https://theory.people.cn/n1/2021/0705/c40531-32148377.html。

[11] 邓小平：《改革的步子要加快》（1987 年 6 月 12 日），《邓小平文选》第三卷，人民出版社，1993，第 238 页。

[12] Lau, Lawrence J., Yingyi Qian, and Gérard Roland. “Reform without Losers: An Interpretation of China’s Dual-Track Approach to Transition.” Journal of Political Economy 108, no. 1 (2000): 120–143. https://doi.org/10.1086/262113.

[13] 华生：《1987—1988 年价格闯关的前因后果——中国价格改革 30 年（之四）》，财新博客，2008 年 11 月 4 日，https://huasheng.blog.caixin.com/archives/3847。

[14] 国务院：《关于加快粮食流通体制改革的通知》，国发〔1993〕9 号，1993 年 2 月 15 日。

[15] 邓小平：《在武昌、深圳、珠海、上海等地的谈话要点》（1992），《邓小平文选》第三卷，人民出版社，1993，第 374 页。