Edith Penrose’s Theory of the Growth of the Firm and the Strategic Management of Multinational Enterprises

Abstract

Foss (2002, p. 148) says, ‘Penrose’s work is, in the crucial dimensions, at variance with economic orthodoxy. ... It should be thought of as a contribution to economic heterodoxy.’ Penrose and Pitelis (2002, pp. 19 et seq.), in describing Fritz Machlup as ‘Edith’s supervisor’ at Johns Hopkins says, ‘A fascinating paradox is how Machlup, a doyen of neoclassical economics, should have been partially responsible for a work so far removed from the mainstream.’ Penrose has also been claimed as a feminist economist (Best/Humphries 2003). Our argument is that Penrose sought to create a theory of the growth of the firm which was logically consistent and empirically tractable. Her subsequent adoption as grandmother of the resource-based view has only limited validity, based on a selective reading of her work and in defiance of its holistic qualities. See the debate between Rugman and Verbeke (2002, 2004) and Kor and Mahoney (2004) and Lockett and Thompson (2004), the latter based on Penrose’s (1960) analysis of the Hercules Powder Company.