The Dynamics of the Organisation of Industry

The paper presents and formalises an approach to the evolution of the organisation of industry which starts from multi-activity firms, and which relates to economists like Young, Stigler, and Richardson. To capture the open-ended process of disintegration of industry, the paper operates with decomposable tasks and gives an account of the vertical and horizontal structure of production by means of weighted trees — in the graphtheoretical sense. Based on this addition to the analytical toolbox, the paper gives an account of the decomposition of industry as driven by the structural innovations and process innovations of firms that specialise and exchange in an open-ended evolutionary process.