The Resource-Based Theory of the Growth of the Firm

Abstract

Not all work with a systems perspective is acknowledged as such. Penrose in her pioneering Theory of the Growth of the Firm (1959; 1995) explored the conditions for the growth of a firm, the determinants and limits of growth. She developed an original framework of analysis in exploring these questions, one which has come to be increasingly acclaimed and influential (Best, 1990). In this paper it is argued that Penrose’s resource-based theory of the growth of the firm is a form of systems thinking. Penrose did not set out to do a systems study and indeed the influence of her work in economics depended on her use of an accepted economic discourse. However it is argued here that the systemic nature of Penrose’s analysis and her awareness of the interpretive filters which mediate between experience and action give special insight to her study. Critical systems thinking aims to provide scope for just such an interpretive approach to the workings of systems in the social world (Flood and Jackson, 1991; Garnsey, 1993). If we recognise Penrose’s perspective as an example of systems thinking, then instead of the work appearing to be a one-off analysis, set apart from other approaches, it can be viewed as part of a wider intellectual movement, an implicit application of systems thinking to the problems of the growing firm. If we can identify Penrose’s method of conceptual inquiry, we are in a position to apply this method, which has proved so fruitful, in other contexts.