The Evolution of an Industrial Sector with a Varying Degree of Roundaboutness of Production

Esben Sloth Andersen

Research output: Working paperResearch

113 Downloads (Pure)


The evolutionary model presented in this paper depicts an industrial sector with a varying degree of economic roundaboutness, i.e. vertical division of labour between producers and users of different types of intermediate products that are ultimately used for the production of a single final product. To include this vertical aspect of industrial dynamics, the model adds the concept of
production trees to the evolutionary models of Schumpeterian competition. The specification of this concept suggests the use of the notions of graph theory and the related algorithms of computer science in the treatment of industrial novelty, including structural innovations. Although the model is developed within the Nelson and Winter tradition, the introduction of the 'Austrian'
issue of roundaboutness implies a major extension of the research agenda, including production-structure innovations, the emergence and functioning of markets for intermediate products, ways of coping with the instability of upstream markets, the spread of the effects of an upstream innovation, and the measurement of the degree of roundaboutness and of overall productivity. The model reflects a Schumpeterian version of the Böhm-Bawerkian vision of the emergence of increased long-term roundaboutness of production. The Schumpeterian approach implies an innovation- and entrepreneur-driven process of vertical disintegration and reintegration.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDRUID - Danish Research Unit for Industrial Dynamics
Number of pages32
ISBN (Print)8778730139
Publication statusPublished - 1996
Externally publishedYes
SeriesDRUID Working Paper

Cite this