The Theory of the Growth of the Firm [Paperback]

Edith T. Penrose (Author)

Book Description

Publication Date: November 9, 1995 | ISBN-10: 0198289774 | ISBN-13: 978-0198289777 | Edition: 3

Why do some firms perform better than others? What enables a firm to grow and take advantage of its opportunities?
Currently much discussion of these questions pivots around the ideas of competencies and capabilities, and the concept of the learning organization or knowledge-creating company. The Theory of the Growth of the Firm is a rich and pioneering work that addresses these questions and laid the foundation for this approach often referred to as the "resource based view of the firm." Edith Penrose analyzes managerial activities and decisions, organizational routines, and knowledge creation within the company and argues that they are critical to the ability of a firm to grow.

Editorial Reviews

Review

"The basic propositions Edith Penrose put forth in her book The Theory of the Growth of the Firm were provocative and path breaking...How good it is to have her book, long out of print, available again. Her insights, her arguments, still read fresh and right, and finally will get the attention that they warrant."--Richard R. Nelson, Columbia University

"Edith Penrose's pioneering work on the resource-based approach to the firm's growth has greatly inspired me and hundreds of other scholars...As we enter the "knowledge society", this reissue of her classic work with its new foreword is well-timed and welcome."--Ikujiro Nonaka, Hitotsubashi University

About the Author

Edith Penrose is Visiting Professor at INSEAD and Johns Hopkins University

Product Details

• Paperback: 296 pages
• Publisher: Oxford University Press, USA; 3 edition (November 9, 1995)
• Language: English
• ISBN-10: 0198289774
• ISBN-13: 978-0198289777
• Product Dimensions: 8.4 x 5.4 x 0.7 inches
• Shipping Weight: 14.9 ounces
• Average Customer Review: 4.8 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,657,289 in Books (See Top 100 in Books)

More About the Author

Discover books, learn about writers, read author blogs, and more.

Customer Reviews

Most Helpful Customer Reviews

10 of 10 people found the following review helpful:

5.0 out of 5 stars Ground-Breaking and Fascinating, July 15, 2001

By 

Philip Hamilton (Austin, TX USA) - See all my reviews
(REAL NAME)   

This review is from: The Theory of the Growth of the Firm (Paperback)

This book helped provide the foundation for what has become known as the resource-based view of the firm (RBV). Back in 1959, when the male gender dominated the economics discipline, Ms. Penrose set out to answer this question: Was there "something inherent in the very nature of any firm that both promoted its growth and necessarily limited its RATE of growth."

I found this book so interesting and helpful (I am a business appraiser) that I read it twice. This led me into studying the resource-based view of the firm.

I recommend this book for anyone interested in the broad topics of business strategy and management. Related books that I recommend include "Contemporary Strategy Analysis," by Robert Grant; "Modern Competitive Analysis, by Sharon Oster; and "Why Firms Succeed," by John Kay.

7 of 7 people found the following review helpful:

4.0 out of 5 stars A classic that has guided management academics for decades, July 28, 2005

By 

Phome "phome" (NY, USA) - See all my reviews

This review is from: The Theory of the Growth of the Firm (Paperback)

The Theory of the Growth of the Firm is a classic book in management literature, and one that is explored by academics as well as business enthusiasts. With this book, Penrose founded what's known as the resource-based view. Essentially, she determined that there must be something inside the firm that drives its growth (i.e. success).

The author explores the reasons for such growth. Penrose moves away from the neoclassical economics model of the firm towards a definition of the firm as one that has administrative responsibilities (strategic planning or management) and a view of the firm as a collection of resources (human resources, technologies and other capabilities a firm has). She argues that choice of how those resources are put to use is central to a firms "entrepreneurial" activity.

Penrose goes on to say that change and growth of firms must be driven from inside the firm because the economy as a whole does not constrain firms. Managers, she says, know that they can alter their environment, and that the environment is not independent of their activities.

The resources that are available within firms are ever changing, of course, and often come together in bundles. This means that there are always some resources that are not being used, or being used inefficiently. Managers who realise this can develop those resources and grow their companies as a result. Thus, it is knowledge in combination with resources that drives growth. This is also what makes each firm unique: there are hundreds of ways to combine those resources, and each firm does it differently.

The book then talks about how growth takes place - sometimes as part of a diversification process or through an acquisition or merger. Penrose also discusses the role of time, and the difference between a small or a larger company growing. Growth, she concludes is possible for all firms - size does not necessarily mean that a firm is more efficient (which is the typical economic argument). The only thing that constrains growth, really, is the limited capacity we humans have for managing a lot of change at once.

The style of writing is conversational, if somewhat dated. The only slight drawback is that Penrose often returns to hammer on the same point. But that's not unusual for this type of book. The most astonishing aspect by far is that Edith Penrose was a woman, in a world of business and academia that then, and still now, consists largely of men.

6 of 6 people found the following review helpful:

5.0 out of 5 stars A richly rewarding read, August 8, 2003

By 

Alex Stewart (Milwaukee, WI United States) - See all my reviews
(REAL NAME)   

This review is from: The Theory of the Growth of the Firm (Paperback)

I find myself springing to the defense of this book, because when I read it - right through - it was with a sense of appreciation for its acumen. Penrose's terminology is a little idiosyncratic but it does not take long for the reader to adjust. Moreover, when reading it with the circumstances of actual companies in mind, it presents a way to gain insight into their histories. One other way to express this is that my notes on this book are very detailed and lengthy. I didn't make these notes simply because the book is a "classic".