ABSTRACT
The idea that competition is a process of development, an ordered process of economic transformation rather than a state of equilibrium, is one of the defining attributes of the evolutionary school of economists; indeed, it is virtually a membership test such is its importance in their world view. The point about all evolutionary economic theory is that it is concerned with the dynamics of economic development, why the economic world changes in they way that it does, and to this degree it overlaps with many of the concerns of modern classical economists to understand the connection between economic growth and the generation and disposal of profits via the working of the price mechanism. 1 Prices and profitability, and the uses to which profits are put to further the dynamic objectives of the firm, are the core of an evolutionary account of economic change too. In the economic theory of this process there is a long tradition of treating rival firms in a particularly simplified way, to the effect that they vary in only one dimension, typically their unit cost of production. This tradition can be traced to Marshall's (1920) theory of economic flux, onward through the writings of Steindl (1952), Downie (1958) and Kaldor (1985), and finds its ultimate expression in the highly influential work of Nelson and Winter (1982). The central purpose of this short essay is to extend the theory of competitive selection to more than one dimension, and to do so by highlighting the importance of the different investment strategies and decisions made by rival firms in pursuit of competitive advantage.
