Do temporary events lead to permanent changes in market positions? For example, will the confrontation with Greenpeace at the Brent Spar oil rig in the summer of 1995 permanently damage Royal Dutch Shell’s image and market standing? Do market share positions gradually build over time or are they conquered in short spurts?
Hysteresis is a phenomenon in which a temporary change in one factor causes a permanent change in another. In hysteresis, which means “remaining” in Greek, an effect remains after its cause has disappeared. In 1881, physicist J.A. Ewing introduced the term into science.1 The most notable example of hysteresis in physics is magnetism. When the strength of a magnetic field (magnetizing force) is increased, the magnetic induction (magnetization) of a ferromagnetic material increases until it reaches saturation. If the magnetic field is reduced or turned off, the magnetic induction does not fall back to zero; part of it, the so-called remanence, stays. Ewing described the concept of hysteresis: “The world should be sufficiently wide to include not only the phenomenon of magnetic retentiveness but other manifestations of what seems to be essentially the same thing.”2 He proved to be right.
As early as 1934, economists looked at hysteresis as a business phenomenon.3 Brown equated hysteresis with persistent habits.4 Georgescu-Roegen emphasized its wide... To read the complete article, login or sign-up using the form below.
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