The Palgrave Encyclopedia of Strategic Management

Living Edition
| Editors: Mie Augier, David J. Teece

Irreversibility

  • Pankaj GhemawatEmail author
  • Eric Van den Steen
Living reference work entry
DOI: https://doi.org/10.1057/978-1-349-94848-2_489-1

Definition

An action or a choice is irreversible if it is difficult or impossible to change.

An action or a choice is irreversible if it is difficult or impossible to change. From the perspective of a firm, irreversibility introduces intertemporal linkages into the profit function.

Insofar as strategic management is concerned, it is an intermediate degree of irreversibility that is of greatest interest. In the absence of irreversibility, choices could be reversed costlessly and there would be no need to look deep into the future (Arrow 1964). In fact, a series of myopic decisions would be a perfectly adequate approach to strategy. Nor could the kinds of moves and commitments aimed at influencing rivals (to which Schelling (1960) first drew attention) be credible and therefore influence competitor behaviour. If, on the other hand, irreversibility were total – a possibility raised, for example, by theories of imprinting (Stinchcombe 1965) – there would be no room for managerial action,...

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Copyright information

© The Author(s) 2016

Authors and Affiliations

  1. 1.IESE Business SchoolBarcelonaUSA