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and development in practice. Hirschman (1958) introduced the term and presented it as something quite
new. Later commentators have taken him at his word. Thus Little (1982) insists that since other authors
had already explored at some length (if with some confusion) the possible role of pecuniary external
economies, Hirschman's linkage concept must have crucially involved a nonpecuniary element. Yet in
Hirschman's definition of backward linkages, as already mentioned, the role of pecuniary externalities
linked to economies of scale is quite explicit: an industry creates a backward linkage when its demand
enables an upstream industry to be established at at least minimum economic scale. The strength of an
industry's backward linkages is to be measured by the probability that it will in fact push other
industries over the threshold of profitability.
Forward linkages are also defined by Hirschman as involving an interaction between scale and market
size; in this case the definition is vaguer, but seems to involve the ability of an industry to reduce the
costs of potential downstream users of its products and thus, again, push them over the threshold.
Seen in this way, the concepts of forward and backward linkages seem quite straightforward and also
less distinctive to Hirschman than is usually portrayed. Fleming (1954), in particular, argued that the
"horizontal" external economies of Rosenstein-Rodan were less important than the "vertical" external
economies that result when intermediate goods are produced subject to scale economies, which sounds
awfully close to linkage theory.
It is also possible to offer simple formal models illustrating the concepts of forward and backward
linkages. Indeed,
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