Contributions to Political Economy (1999) 18, 87–104

EDITH PENROSE, ECONOMICS AND

STRATEGIC MANAGEMENT

NICOLAI J. FOSS
Department of Industrial Economics and Strategy, Copenhagen Business School

Edith Penrose’s work on The Theory of the Growth of the Firm is often seen as a classic in
strategic management and a precursor of today’s resource-based view of the firm.
However, it is argued in this paper that this is, at best, imprecise and rather a mis-
representation of Penrose: her interest was not in whether there can be rents in equi-
librium, but in firm growth as a disequilibrium phenomenon. Moreover, her basic
vision of the competitive process is very different from that which animates modern
economic approaches to strategy, such as the resource-based approach and new
industrial organisation economics. This paper briefly discusses some implications for
modern strategic thinking of Penrose’s vision.

Strategic management does not have many classics. Granted, it is hard to have estab-
lished and recognised classics in a field that is not only very young (reaching back only
to the 1950s) but also very fragmented (Mintzberg, 1990). But there is a handful of
books that most strategy scholars would recognise as truly classic contributions to the
field. Among these is Edith Penrose’s The Theory of the Growth of the Firm. When the
book was reissued by Oxford University Press in 1995, the back of the new edition
contained endorsing statements by two strategy scholars (Sumantra Ghoshal and
Ikujiro Nonaka) and one heterodox economist (Richard Nelson). In fact, this rather
accurately reflects the composition of the contemporary audience of this book, which
originally was clearly aimed at an audience consisting of economists. Mainstream
economists, even those working in industrial organisation, are unlikely to have
encountered the book.1
Penrose’s influence in strategic management has largely come about as a result of
her being considered the founding matriarch of the so-called ‘resource-based
perspective’ (henceforth, RBP). This perspective has become increasingly influential
during the last 15 years (since Wernerfelt, 1984) and is arguably the dominant
approach in contemporary strategic management. The RBP took over from the once
dominant industry analysis approach that is commonly associated with Michael Porter
(1980) and which was developed on the basis of the Bain–Mason–Scherer structure–
1
Best and Garnsey (1999, pp.187–8) are surely going too far, when they argue that Penrose (1959) is
‘recognized by, if not familiar to, every economist’.

© Cambridge Political Economy Society 1999

88 N. J. FOSS

conduct–performance (SCP) paradigm in industrial organisation (Scherer and Ross,

1990).1 Thus, many discussions in strategic management have taken place under the
heading of ‘Penrose versus Porter’ and the RBP is widely thought as a restatement,
even rediscovery, of positions originally associated with Penrose (1959) (e.g. Werner-
felt, 1984; Mahoney and Pandian, 1992; Peteraf, 1993; Williams, 1994; Kor and
Mahoney, 1999).
I think this reading is largely incorrect, and shall explain why in this paper. In fact,
the influence from Penrose to the RBP is virtually non-existent. Instead, the RBP
is founded on ideas from basic neoclassical price theory, particularly of the type
developed by economists associated with the University of Chicago and UCLA. Thus,
many of the differences, and many of the controversies, between resource-based
scholars and adherents to industry analysis or new industrial organisation approaches
to strategy (Tirole, 1988) is in actuality—and mutatis mutandis—a replay of the classic
public policy debates between Harvard and Chicago (Goldschmid, Mann and
Weston, 1974).
In contrast, Penrose’s work is, in the crucial dimensions, at variance with economic
orthodoxy—whether Chicago, Harvard or the new industrial organisation style.2 It
should rather be thought of as a contribution to economic heterodoxy. Penrose’s
basic, and too often overlooked, themes are flexibility in an uncertain world, organi-
sational learning as an evolutionary discovery process, the vision of the management
team, entrepreneurship, etc. Her work on growth of the firm through diversification is
an application of those themes.
It is therefore not surprising that only a few dimensions of her richly faceted work
can be found in the RBP. Her interest was not in whether there may be efficiency rents
in equilibrium (hence, sustainability of competitive advantage). Instead, her emphasis
was on learning, disequilibrium, differential cognition, organisation, and the creation
of real options. Her work points towards a distinctly non-orthodox approach to not
only strategy but also firm organisation. It is in many respects closer to behavioural
perspectives on firms (e.g. March and Simon, 1958; March, 1988; Beach, 1993;
Weick, 1995; Shapira, 1997) than to more economics-based approaches.
In the following pages, I shall seek to substantiate these claims. Thus, my focus is
partly exegetical, partly reconstructive. The focus will be almost exclusively on
Penrose’s 1959 work. This is certainly not because it is the only interesting work she
wrote. Rather, it is undeniably her masterpiece; a masterpiece, however, whose
fundamental message has been insufficiently appreciated. Moreover, much of her

1
However, industrial organization perspectives have made a strong come-back recently (Chemawat,
1991, 1997; Brandenburger and Nalebuff, 1996).
2
Admittedly, this is a somewhat delicate issue. To be sure, there is critique of neoclassical economics in
Penrose (1959), but this has mostly to do with the inability of the neoclassical theory of the firm to explain
firm growth (pp. 1, 15). Arguably, Penrose adopts something like the position later expounded by Machlup
(1967) that while the neoclassical theory of the firm is indeed inappropriate for some purposes, it is clearly
appropriate for other purposes (such as comparative-statics). However, the foreword to the new and third
edition of Penrose (1959) is explicitly critical of economic orthodoxy. See also Pitelis and Wahl (1998) for a
reading of Penrose that stresses her differences from more mainstream approaches.
 EDITH PENROSE AND STRATEGIC MANAGEMENT 89

other work is not related to the arguments in this book, and are, thus, not relevant to
bring into the discussion.1

I. ECONOMIC APPROACHES TO STRATEGY

I.a. Economics and strategy
There can be little doubt that economics has become a dominant voice in the con-
temporary conversation of strategy scholars, at least since 1980 (Porter, 1980) and
perhaps even earlier. There are many reasons for this. Among the obvious ones are
that economics provides a relatively clear-cut language and a number of useful estab-
lished insights, allows strategy scholars to interpret (long-lived) performance differ-
ences between firms (e.g. by means of entry, exit and mobility barriers), and that in
general a number of the basic strategic issues lend themselves rather naturally to an
economic treatment. Thus, increasingly, concepts such as ‘subgame perfect equilib-
rium’, ‘asset specificity’ and ‘real options’ have become part of the discourse in
strategy, and even strategy scholars who otherwise have difficulties with economic
approaches to strategy accept that the essence of strategy is the pursuit of economic
rent.
Arguably, there are two overall approaches—each existing in different versions—
that dominate contemporary economic approaches to strategy research.2 The first one
is the industry analysis approach originally developed by Michael Porter (1980) and
later updated in the light of breakthroughs in game-theoretical, new industrial organi-
sation economics (Tirole, 1988; Shapiro, 1989) by Brandenburger and Nalebuff
(1996), Chemawat (1997) and others. The other dominant contender is the resource-
based view, launched by a number of scholars in the mid-1980s (Teece, 1982;
Wernerfelt, 1984; Barne, 1986). I shall briefly discuss these two overall approaches.
The point that I shall seek to substantiate is that the much-discussed differences
between these two approaches vanish if compared to their differences to the vision
that animates Penrose’s work.

I.b. Industrial organisation approaches

In the mid-1970s, economists-turned-strategy scholars, such as Richard Caves and
Michael Porter, realised that the Bain–Mason structuralist approach in industrial
organisation (IO) could be very usefully applied to the study of firm strategies and also
for deriving practical recommendations. To Caves and Porter, basic IO concepts such
as entry barriers and the collusion such barriers may foster offered an explanation of,
1
For example, surprisingly Penrose’s work on multinationals (Penrose, 1968, 1971) does not draw on her
1959 book. Thanks to Neil Kay for pointing this out to me.
2
Transaction cost economics (Williamson, 1996) and agency theory (Holmström, 1982; Holmström and
Milgrom, 1991) may also be mentioned as strong voices, but they are more narrowly concerned with the
firm’s boundary choices and internal organisation, respectively. Thus, neither has anything to say about key
strategy issue of the firm’s positioning in the product market. For a review and discussion of alternative
approaches to the ‘strategic theory of the firm’, see Foss (1999C).
90 N. J. FOSS

for example, the observed persistence of above-normal profit. However, it was not
entirely unproblematic to rely on IO in strategy research; the would-be importer of IO
to the strategy field confronted a basic translation problem, as Porter (1981) clearly
recognised.1 Thus, IO was fundamentally static, it did not seriously consider the
diversified firm, it saw the firm as a unitary decision-maker, it had an industry—rather
than a firm—focus, it operated with perfect competition as the ultimate yardstick for
purposes of welfare comparisons, etc. (Porter, 1981; Scherer and Ross, 1990). This
was much in contrast to the mainstream of management literature, which saw strategy
as a matter of entrepreneurial action in an uncertain and hard-to-predict environment
(Ansoff, 1965), did not neglect the large, diversified corporation (Chandler, 1962),
and was very much concerned with the internal workings of the firm (Bower, 1970).2
Although Porter was well aware of the problems this raised for an application of IO
to the strategy discipline (Porter, 1981), crucial characteristics of IO did in fact carry
over to his industry analysis approach (Porter, 1980). An unfortunate example is the
black-box conceptualisation of the firm that is characteristic of older IO and which is
clearly present in Competitive Strategy (Porter, 1980). Another one is in the focus on
non-cooperative equilibria where firms earn rents from their market-power because of
their ability to engage in tactics designed to build and maintain mobility and entry
barriers.
All this was verbally stated and the equilibrium focus in Porter’s work was rather
implicit. The upsurge in work on the new IO that took place at the beginning of the
1980s changed this. The study of firm strategy came to be understood as founded on
game-theoretical studies of behaviour and performance in imperfectly competitive
markets (Tirole, 1988; Schmalensee and Willig, 1989; Shapiro, 1989; Saloner 1994).
According to the prominent new IO scholar, Carl Shapiro (1989), recent work in new
IO can virtually be identified with ‘the theory of business strategy’. Indeed, he goes as
far as asserting that ‘[a]t this time, game theory provides the only coherent way of
logically analyzing strategic behavior’ (1989, p. 125). ‘Strategic behavior’, in this
approach, means engaging in behaviour that by influencing rivals’ expectations of
one’s future behaviour is able to influence significantly the behaviour of those rivals to
the benefit of the strategising firm.
Although the Porter industry analysis framework is not identical to the new IO, they
have a common ancestor in older IO, and share many of the same assumptions and
concerns.3 In some ways, however, the new IO represents an advance relative to the
Porter framework. For example, firms in the new IO are not homogenous. Thus, they
may differ not only in terms of their cost structures but also in terms of, for example,
their reputations (Tirole, 1988, p. 256). Moreover, the notions of factor/resource
1
For example, Bain (1959) explicitly excluded from the focus of IO any ‘. . . internal approach, more
appropriate to the field of management science, such as could inquire how enterprises do and should behave
in ordering their internal operations and would attempt to instruct them accordingly’ (pp. vii–viii).
2
We note in passing that Penrose’s basic vision is congenial to the mainstream of management and
strategy literature, particularly the type of work associated with Christensen and Andrews (e.g. Andrews
1971).
3
However, Porter’s (1980) analysis of issues such as signalling, is strikingly modern.
 EDITH PENROSE AND STRATEGIC MANAGEMENT 91

indivisibility and immobility become central, primarily because these notions play a
key role in understanding entry-deterrence and, more generally, the notions of
credible threats and commitments.
In this view, strategy becomes primarily a matter of deploying given resources to a
product-market, and utilising them in sophisticated plays and counter-plays. Strategy
becomes a matter of extracting maximum monopoly rents out of ‘fixed factors over
the planning horizon’ (Caves, 1984, p. 128). Thus, firms in the new IO are clearly dif-
ferent, but the sources of heterogeneity are given and fixed; firms do not themselves
create their own opportunity set. To some extent, this is because the agents that
populate new IO models are incredibly smart. Here, a strategy involves anticipating
any and all actions that other players might take in all future stages of the game, and
calculating the optimal response. Since all players are able to do this, the equilibrium
position is essentially given from the beginning. Players cannot be surprised by
unexpected events, there is never any difference between the competence of players
and the difficulty of decision problems, and although agents may formally learn in
Bayesian games, their learning functions never change.

I.c. The resource-based perspective

Whereas the origins of the Porter industry analysis approach were very clearly in Bain–
Mason–Scherer SCP theory, the resource-based view may be seen as drawing inspira-
tion from the antagonist of the Bain–Mason view, namely the Chicago approach to
IO.1 In the Chicago view, entry barriers are informational, concentration is a result of
efficiency, and high returns are returns to efficient underlying assets rather than
monopoly profits stemming from restriction of supply (e.g. Demsetz, 1973, 1982).
Such returns may be long-lived because of the complexity of the assets that cause
them (Demsetz, 1973). Moreover, assets are not necessarily priced according to their
value, because of informational asymmetries (idem). Thus, the Chicago view of IO is
one that stresses efficiency in a world constrained by informational scarcity; in con-
trast, SCP theory stressed market power and gave little attention to issues of infor-
mation.
The Chicago influence can be clearly seen in the resource-based analysis of the
conditions for sustained competitive advantage (Peteraf, 1993). Thus, according to
this analysis, resources yield a sustained competitive advantage when they meet the
criteria of:
(1) heterogeneity—this implies efficiency differences across resources and therefore the
existence of rents;
(2) ex ante limits to competition—i.e. resources have to be acquired at a price below
their discounted net present value in order to yield rents. Otherwise future rents
will be fully absorbed in the price paid for the resource (Demsetz, 1973; Barney,
1986);

1
See Foss (1999A) for a more detailed analysis of the relation between the Chicago view and the RBP.
92 N. J. FOSS

(3) ex post limits to competition—i.e. it should be difficult or impossible for competitors

to imitate or substitute rent-yielding resources (Lippman and Rumelt, 1982);1
and
(4) imperfect mobility—i.e. the resource should be relatively specific to the firm. Other-
wise, the superior bargaining position that is obtained from not being tied to a
firm can be utilised by the resource (or the resource’s owner) to appropriate the
rent (or, at least a large portion of the rent) that the resource helps create.
Clearly, this rather basic exercise explicitly draws on simple, economic equilibrium
price theory as set out in any standard textbook on the subject.2 It is easy, indeed, to
discern the role of equilibrium assumptions in the RBP. For example, Peteraf (1993)
develops the concept of Ricardian rent using efficiency differences across firms under
competitive equilibrium as a benchmark. And Barney (1986) utilises the finance
theory concepts of strong and weak efficiency to elucidate the reasoning behind the
concepts of perfect factor markets and factor market imperfections. Indeed, the very
concept of sustained competitive advantage is often defined in equilibrium terms: it is
that advantage which lasts after all attempts at imitation have ceased. So, (zero
imitation) equilibrium is utilised as a yardstick to define and understand (sustained)
competitive advantage.

I.d. Spanners in the works

On the face of it, the RBP and (Bain–Mason or new) industrial organisation
approaches to strategy are widely different, and this is indeed how they have normally
been portrayed. Thus, whereas the former stresses an efficiency perspective, focuses
on the firm’s resources (to the neglect of the external environment) and adopts a
factor market perspective, the latter stresses a market power perspective and focuses
on product market interaction (e.g. Barney, 1991). Or so the conventional wisdom
has it.
However, these differences may be more apparent than real. First of all, note that
both approaches conceptualise competitive advantage as rents that can be sustained in
equilibrium. Second, the ‘trick’ with which these rents are generated is in both cases
the time-honoured one of throwing one or two spanners into the works of an otherwise
perfect world. In the case of the RBP, it is assumed, for example, that successful firms’
technologies are not observable by less successful firms (Lippman and Rumelt, 1982),
and in the case of the industrial organisation approach, it is assumed that, for example,
firms may establish Stackelberg commitments by committing large sunk costs to certain
markets or may build reputations for ‘irresponsibly’ aggressive pricing behaviour in
the case of entry (Tirole, 1988). Note that these spanners in the works are essentially
1
As Dierickx and Cool (1989) clarify, there are a number of mechanisms at work that often make it hard
for competitors to copy the sources of competitive advantage of a successful firm. For example, there may be
‘causal ambiguity’, which means that competitors confront difficulties ascertaining precisely how a bundle of
resource contributes to success.
2
For a very interesting Austrian critique of the RBP that also stresses the orthodox nature of the RBP, see
Lewin and Phelan (1999).
 EDITH PENROSE AND STRATEGIC MANAGEMENT 93

informational in nature. Moreover, in all these cases, the emphasis is, in actuality, on
‘sticky’ resources.
Thus, in spite of their different intellectual backgrounds and ways of expressing
basic insights, both of these two approaches stress that product market advantages are
dependent on factor market imperfections. And both start out from an otherwise
perfect neoclassical world and introduce selected imperfections in order to generate
the desired results, namely the existence of rents in equilibrium. In fact, in neither the
resource-based nor the industrial organisation view are innovation, learning and
differential cognition prominently placed. Essentially, this is because both views start
out from the same neoclassical basis in which perfection rules in all dimensions,
except those few that the analyst singles out as relevant spanners in the works. This, as
we shall see, is very different from Penrose’s approach. However, we first need to
consider how mainstream economists have tried to cope with Penrose’s analysis.

II. THE RECEIVED VIEW

II.a. The main argument of The Theory of the Growth of the Firm
The conventional outline of the main argument of Penrose’s 1959 book is well-known
and shall be only briefly summarised: firms are collections of productive resources that
are organised in an administrative framework which partly determines the amount and
type of services that the resources yield. As they go along with their productive opera-
tions, firms—or, more precisely, the management team—obtain increased knowledge
of the services that may be obtained from resource.
The results of such learning processes is, first, the expansion of the firm’s ‘produc-
tive opportunity set’ (the opportunities that the firm’s management team can see and
can take advantage of ) and, second, the release of managerial excess resources that
can be put to use in other, mostly related, business areas. Since the opportunity costs
of unused, excess resources are zero, there will be a strong internal incentive for such
diversification which in turn causes the firm to grow—an idea that according to
Penrose destroys the notion of the firm’s optimum size. However, the managerial
resources inherited from the past set a limit to the firm’s rate of growth. In Penrose,
this is rationalised by pointing to the difficulties of socializing new managers that are
needed for the expansion of the firm. Thus, the main theme of the book concerns the
growth of successful firms through related diversification, and this main theme has
indeed been well represented in much of the diversification research since Rumelt
(1974).1 In contrast, Penrose is not taken up with what is arguably the main aim of the
RBP, namely to analyse the circumstances under which resources may provide long-
lived rent streams.

1
In fairness, it must be observed that an important research theme in the resource-based perspective has
in fact been diversification, and here Penrose’s insights have arguably been more adequately represented,
although much of this literature is also cast within the maximisation/equilibrium framework of mainstream
economics (e.g. Montgomery and Wernerfelt, 1988).
94 N. J. FOSS

II.b. Mainstream interpretations of Penrose

A number of mainstream writers who took an interest in Penrose’s work (Baumol,
1962; Marris, 1964) imposed the Penrose effect exogenously (Gander, 1991), but
eventually it became subordinated under supposedly more general theories of adjust-
ment costs in the theory of investment of the firm (Treadway, 1970). Given this, and
using a dynamic control theory approach, the Penrose effect arises naturally as the
profit-maximising firm calculates its optimal time-profile of outputs. A steady-state
equilibrium growth pattern is shown to exist, in which firm size and management size
grow at the same rate (Marris, 1964; Slater, 1980; Gander, 1991). The high point of
this literature is Rubin’s (1973) attempt to reconstruct Penrose (1959) in terms of
finding the solution to the dynamic optimisation problem of balancing the develop-
ment of new resources (using existing resources) and the use of existing resources
directly in production.
Thus, Penrose’s ideas became absorbed in mainstream economics by, first, arguing
that her purportedly most important point, ‘the Penrose effect’, was just a minor detail
in the neoclassical analysis of optimal investment, and, second, by demonstrating that
Penrose’s critique of equilibrium economics should not really be taken seriously, as
her ideas were fully compatible with extended notions of equilibrium. The third wave
of inclusion of Penrosean ideas in mainstream economics is marked by the emergence
of the resource-based perspective. The attempt to interpret Penrose’s ideas in terms of
mainstream economics is perhaps not so surprising, if we take these ideas to merely be
that (1) there is a constraint on the growth of the firm stemming from the difficulties of
expanding the management team, and (2) firm heterogeneity is the source of
differences among revealed competitive advantages. Both of these points lend
themselves to formal modelling without too much difficulty. However, here I will
argue that there is more to The Theory of the Growth of the Firm than these points.
Moreover, we should not forget that although mainstream treatments of Penrose’s
insights may be valuable and justified, they run counter to Penrose’s own critique of
(parts of) neoclassical economics. As she saw it herself, her theory constituted a
powerful critique against certain aspects of the neoclassical theory of the firm. In the
neoclassical theory of the firm, she says, there is ‘. . . no notion of an internal process of
development leading to cumulative movements in any one direction’ (1959, p. 1), a
notion that is absolutely crucial for understanding firm development. Rather, growth
is simply a matter of adjusting to the equilibrium size of the firm. But if services are
produced endogenously (and continuously) through various intra-firm learning pro-
cesses involving increased knowledge of resources, ‘new combinations of resources’
(1959, p. 85), and an expanding productive opportunity set, there is no equilibrium
size.1
1
Moreover, because of the difficulties of managing new resources and services, and of assimilating new
managers in the firm, firm growth is not smooth or ‘balanced’ (as in Marris, 1964; Slater, 1980). On the con-
trary, growth rates in succeeding periods will typically be negatively serially correlated, so that high growth in
one period is followed by low growth and vica versa. In fact, this is the true ‘Penrose effect’, and a first
indication that even on this fundamental level, Penrose has been partly misrepresented in the literature.
 EDITH PENROSE AND STRATEGIC MANAGEMENT 95

III. MISSED ASPECTS OF PENROSE’S WORK

Penrose’s book is very rich indeed, and it is perhaps not surprising that important
points in it have been missed, both in economics and in strategic management. Most
importantly, many of the basic ideas that Penrose used to build the main argument
about growth through related diversification have been missed. Arguably, this has to
do with Penrose’s belonging to economic heterodoxy, primarily the post-Marshallian
tradition.1 Moreover, there are also ideas in her work that have a striking resemblance
to Veblen’s work (Foss, 1998). I briefly discuss the heterodox nature of Penrose’s
work in the following.

III.a. The Theory of the Growth of the Firm as a part of economic heterodoxy
As a starting point, one may think of Penrose as re-stating, refining, and sometimes
radicalising, the basic conceptualisation of the firm that can be found in the work of
Marshall and his later followers. Specifically, like Marshall, and later writers in his
tradition, Penrose emphasised that not only is the firm a repository of productive
knowledge, it is also an institution that develops and manages this knowledge. More-
over, the two processes of developing and managing knowledge may be hard to
separate, both in practice and conceptually.
As stated earlier there is also a Veblenian (the emphasis on cumulative causation
and group-based knowledge assets) flavour to Penrose’s overall argument. Although
she does not refer, even a single time, to Veblen in The Theory of the Growth of the Firm,
her later (1995) nutshell conceptualisation of main message of the 1959 book is
straight out of Veblen: ‘One of the primary assumptions of the theory of the growth of
firms is that “history matters”; growth is essentially an evolutionary process and based
on the cumulative growth of collective knowledge, in the context of a purposive firm’
(1959[1995], p. xiii). As a third intellectual allied, one may single out Schumpeter.
The Schumpeterian flavour of Penrose’s work is more than a matter of spicing up the
arguments with the standard quotations from Schumpeter; more fundamentally,
Penrose’s basic vision of the competitive process in general, and of the firm in par-
ticular, is disequilibrium-oriented and subjectivist (or cognitivist). Thus, important
parts of Penrose’s overall argument are cognition, learning, and co-ordination. All of
these are neglected, or interpreted very narrowly, in that part of contemporary strategy
thinking that draws on (mainstream) economics. Consider each in turn.

III.b. Cognition
The firm’s productive opportunity, arguably the key concept of The Theory of the
Growth of the Firm (cf. also Fransman, 1994, p. 744), is ‘. . . the productive possi-
bilities that its “entrepreneurs” see and can take advantage of. A theory of the growth

1
Which is represented by Andrews (1949), Downie (1958), Malmgren (1961), Richardson (1972),
Loasby (1991), Langlois (1992), Earl (1996), and Kay (1997). For a splendid discussion of the post-
Marshallian stream in economics, see Finch (1999).
96 N. J. FOSS

of the firm is essentially an examination of the changing productive opportunity of

firms’ (1959, pp. 31–2). By implication, differential firm growth (as in Nelson and
Winter, 1982) can be explained, at least in part, in terms of different productive
opportunities. Thus, the notion of productive opportunity is quite a central notion in
The Theory of the Growth of the Firm. This is in contrast to both the RBP and new IO
inspired approaches to strategy, where decision-makers are assumed not to differ in
cognitive terms, and where differences in competitive advantages or the growth rates
of firms, therefore, can not be explained in such terms.
The notion of productive opportunity is clearly a subjective (or, as some may prefer,
‘constructivist’) category.1 In terms of modern organisation theory (notably, Weick,
1995) Penrose is here clearly talking about the ‘enactment’ of the environment that
the management team performs, so that ‘. . . the relevant environment is not an
objective fact discoverable before the event’ (Penrose, 1959, p. 41).2 Penrose’s
subjectivism is particularly apparent in her adoption of Boulding’s (1956) concept of
‘the image’: ‘. . . the environment is treated . . . as an “image” in the entrepreneur’s
mind of the possibilities and restrictions with which he is confronted, for it is, after all,
such an “image” which in fact determines a man’s behavior’ (Penrose, 1959, p. 5). It
should be noted that the idea of the image is not just another version of the ideas of
bounded rationality and tacit knowledge. It explicitly recognises that agents have to
make sense of their world, that agents’ cognitive development is molded in social
processes, and it implies that tacitness is an aspect of virtually all acts of interpretation
and meaning attribution, as modern ‘image theory’ (Beach, 1993) has clarified.

III.c. Entrepreneurship and learning

It is seldom recognised that Penrose’s book stresses entrepreneurship and learning in a
world characterised by change and uncertainty. Instead there has been a tendency to
associate her 1959 analysis with path-dependence and rigidity effects, at least to an
extent that this analysis is interpreted as an endorsement of only extremely narrow
diversification. However, this view is wrong. ‘In the long run’, Penrose explains,
. . . the profitability, survival and growth of a firm does not depend so much on the efficiency
with which it is able to organize the production of even a widely diversified range of products as
it does on the ability of the firm to establish one or more wide and relatively impregnable ‘bases’
from which it can adapt and extend its operations in an uncertain, changing and competitive
world (Penrose, 1959, p. 137).

1
Penrose elaborates: ‘. . . for an analysis of the growth of the firm it is appropriate to start from analysis of
the firm rather than the environment and then proceed to a discussion of the effect of certain types of
environmental conditions. If we can discover what determines entrepreneurial ideas about what the firm can
and cannot do, that is what determines the nature and extent of the “subjective” productive opportunity of
the firm, we can at least know where to look if we want to explain or predict the actions of particular firms’
(Penrose, 1959, p. 42).
2
Elaborating the cognitive content of the notion of the firm’s productive opportunity, Penrose explains
that there ‘. . . is a close relation between the various kinds of resources with which the firm works and the
development of the ideas, experience and knowledge of its managers and entrepreneurs’ (Penrose, 1959,
p. 85).
 EDITH PENROSE AND STRATEGIC MANAGEMENT 97

Thus, seemingly paradoxically, flexibility and adaptation are really just as much a
message of the analysis as specialisation is. The paradox vanishes on realising that
specialisation in Penrose’s analysis means specialisation in terms of the underlying
base of resources and competencies (rather than products) and that such specialisa-
tion may be fully consistent with seizing new business opportunities, for example, in
the form of diversifying to new product markets that are, at least in terms of products,
‘unrelated’ relative to the firm’s existing product portfolio.
In fact, as Penrose makes clear, there may be a considerable option value associated
even with a specialised base of resources and services.
A firm is basically a collection of resources. Consequently, if we can assume that businessmen
believe there is more to know about the resources they are working with than they do know at
any given time, and that more knowledge would be likely to improve the efficiency and profit-
ability of their firm, then unknown and unused productive services immediately become of
considerable importance, not only because the belief that they exist acts as an incentive to
acquire new knowledge, but also because they shape the scope and direction of the search for
knowledge (Penrose, 1959, p. 77).

In other words, ‘businessmen’ may have a rational expectation that the resources and
services that they control may yield more options than are immediately apparent and
that further learning about them may reveal these options—a striking anticipation of
real-options thinking that has only made its way in economics and the firm strategy
field during the last 5–10 years. Thus, firm development is essentially an evolutionary
and cumulative process of ‘resource learning’ (Mahoney, 1995), in which increased
knowledge of the firm’s resources help both to create options for further expansion
and to increase absorptive capacity (Cohen and Levinthal, 1990), or, to use Penrose’s
terminology an expanding ‘productive opportunity’. All this, however, needs to be co-
ordinated.

III.d. Co-ordination
A major focus of The Theory of the Growth of the Firm lies in administrative co-ordina-
tion.1 Among other things, Penrose uses the notion of administrative co-ordination to
define the boundaries of the firm (1959, p. 20). Her primary interest, however, lies in
understanding the connection between administrative co-ordination and the produc-
tion of services. In this connection, a crucial argument is that many different services
may often be yielded by the same resources, depending on the uses to which the
management team decide to put them and on the knowledge that management has of
these resources.
These notions of the managerial task is much in contrast to modern organisational
economics (Holmström and Milgrom, 1991; Milgrom and Roberts, 1992; Hart,
1995; Williamson, 1996) where management is essentially assumed to always know

1
Pitelis and Wahl (1998, p. 259) argue that ‘Edith Penrose is arguably the first economist to enter “the
black box”, the firm’. Considering how little Coase (1937) actually said about internal organisation, there is
much truth in this view.
98 N. J. FOSS

the best uses of resources (even though incentive problems may make first-best
utilisation impossible). Thus, the strong dichotomy between exchange and produc-
tion, which is characteristic of organisational economics, is not present in Penrose’s
work.
Relatedly, the RBP has neglected the actual process of co-ordinating and deploying
resources to alternative uses as well as the fact that the actual use may determine what
services can be obtained from a resource. Instead, resource-based theorists, who only
consider the issues of the terms at which resources were acquired (Barney, 1986)
and/or whether they are protected (Peteraf, 1993), forget that it is the actual applica-
tion in production, and not the mere possession, of resources that create revenue. The
same may be said of the application of new IO in strategy. In both cases, it is implicitly
assumed that managers know what are the best uses of resources right from the
beginning, and there is, therefore, little need for learning, and no need for experi-
mentation. In contrast, Penrose was clearly concerned with managerial co-ordination
and one might even construct an argument that her theorising leads us to what would
in modern management studies be called ‘strategic human resource management’
where the focus is on the development of the firm’s pool of talents with particular
goals in mind.

IV. IMPLICATIONS FOR THEORISING ON THE FIRM AND STRATEGY

In The Theory of the Growth of the Firm, Penrose was both critical and constructive;
critical of the limitations of the neo-classical theory of the firm of her day, and clearly
constructive by putting forward a new theory of the firm, based on knowledge,
learning and cognition. The character of this new theory was not appreciated when the
book was published and it still awaits its full development. If one wishes to develop
such a theory, a pertinent place to begin is where Penrose began: with managerial
cognition and decision-making. In the view taken by Penrose, managers exercise
judgment based on their imagination (Shackle, 1972; Beach, 1993). Imagination, in
turn, is partly rooted in (imperfect) cognition and knowledge. As I very briefly sketch
in the following, this has important implications for how we think about strategy and
organisation.

IV.a. Management and strategy

In a cognitive view, the essence of strategic decision-making is not choice among given
alternatives, but the process by which the strategist understands his environment
(including, as Penrose stressed, ‘his’ firm’s resources), define which variables are
relevant, attaches meaning to information and produce problem-solving heuristics.1
All our knowledge of this sort of problem-solving behaviour in complex environments
1
There is a surprising lack of work on this in the firm strategy field. However, see Stimpert (1989) for an
early contribution.
 EDITH PENROSE AND STRATEGIC MANAGEMENT 99

indicates that, first, it is not best represented by an optimisation calculus (Dosi

and Marengo, 1994), and, second, it is of considerably broader scope than finding
the transaction cost minimising organisational form or the entry-deterring level of
capacity investment. If (strategic) managers are judged by their ability to make the
right choices among a set which they themselves partly generate, they are also judged
by their ability to break with existing practice, to mediate and to engage in sense-
making (Weick, 1995). Thus, leadership and the provision of cognitive frames enter
the picture.
This also implies that concepts such as adaptation, co-ordination, management, etc.
become intimately associated with learning, rather than with picking alternatives out
of an already known set.1 Specifically, management learning must involve more than
Bayesian revision of priors into posteriors; it must also involve setting up new interpre-
tive frameworks—new ‘images’, in Penrose’s (1959) terms—for handling new types of
problems. Managerial services are based on well-validated constructs for selecting and
interpreting date and for making timely and effective decisions (Loasby, 1983). More
generally, in this perspective, the essence of economic behaviour would seem to lie
in understanding the environment, defining what are the relevant variables in that
environment, making sense of incoming information, generating procedures which
can help solving problems, and, finally, actually taking action (ibid.; Dosi and
Marengo, 1994; Marengo,1995).
Clearly, in such a cognitive view, managers cannot be presumed to undertake these
mental processes in the same way and they cannot be presumed to reach the same
conclusions. But this implies that we have identified a whole set of determinants of
differential competitive advantages that have been missed so far, at least in economic
approaches to strategy. For if managers hold a different view of the world, work with
different heuristics and decision-making procedures, etc., then they are also likely to
hold widely different views of which resources will be valuable in the future, which sort
of positioning is optimal in the same industry, or evaluate competitive threats in
different ways. All this will be determinative of revealed competitive advantages on a
par with the firm’s endowment of resources.

IV.b. Organisation
In a Penrosean cognitive perspective, where it cannot be presumed that division
X understands the same by the message ‘the state of the world is Z’ as division Y does,
or the divisions do not understand the message at all, the over-riding organisational
design objective is creating a shared knowledge-base and getting everybody on the
same wavelength. In firms that primarily grow through mergers and acquisitions this
may be an extremely time-consuming and costly process, and this has often been
singled out as one of the important reasons why mergers may break up again. Agents
that are engaged in productive activities often spontaneously develop shared mental
1
This will certainly not come as a surprise to modern organisation theorists; see, for example, March
(1988).
100 N. J. FOSS

construct, or, if you like, ‘corporate cultures’, that help co-ordinating distributed
knowledge by infusing employees with firm-specific shared knowledge.
As Marengo (1995) argues, if agents entering the firm held the completely same
habits of thought/models of the world, the only obstacle to efficient co-ordination of
their actions would be precisely the sort of incentive problems that preoccupy modern
organisational economists. However, in a world in which agents do not share exactly
the same models and do not know each others’ models, a collective knowledge base is
required for co-ordination. As simulation work, built on the theory of classifier
systems, demonstrate, such a knowledge base—a Penrosean image—may develop as a
result of organisational learning under rather general assumptions (ibid.). Moreover,
because of the role of change and lock-in, firms will develop different knowledge bases
for co-ordinating their stocks of distributed knowledge. This helps to account for
firm heterogeneity—or, if you like, differential capabilities—and, to the extent that
collective knowledge bases influence productive and transactional efficiency (which is
more than likely), also helps to account for differences in revealed competitive
advantages.
However, while this puts some more conceptual meat on the skeleton of
‘knowledge-based assets’ often encountered in the resource-based literature on the
firm, it does not say anything directly about the firm–market boundary. In other
words, why is it that sometimes markets can co-ordinate distributed knowledge and
sometimes firm organisation is necessary? The answer may turn on differences in the
histories of the emergence of collective knowledge bases which help us to understand
the phenomenon of differential capabilities. Thus, if capabilities are ‘dissimilar’, in the
Penrose-inspired terminology of George Richardson (1972), it is because they are
supported by different underlying collective knowledge bases, including managerial
images.
In Richardson’s terminology, production can be broken down into various stages or
activities. Some activities are similar, in that they draw on the same general capabilities.
Activities can also be complementary in that they are connected in the chain of
production and therefore need to be co-ordinated with one another. Juxtaposing
different degrees of similarity against different degrees of complementarity produces
a matrix that maps different types of economic organisation. For example, closely
complementary and similar activities may be best undertaken under unified govern-
ance.
Richardson’s insight is a simple but extremely profound one. For it suggests that, as
a quite general matter, capabilities are determinants of the boundaries of the firm.
Problems of economic organisation may crucially reflect the possibility that a firm may
control production knowledge that is, in important dimensions, strongly different
from what others control. Thus, the management team of one firm may quite literally
not understand what the management team of another firm wants from them (for
example, in supplier contracts) or is offering them (for example, in license contracts).
Their respective Penrosean images are not overlapping, as it were. In this setting, the
costs of making contacts with potential partners, of educating potential licensees and
 EDITH PENROSE AND STRATEGIC MANAGEMENT 101

franchisees, of teaching suppliers what it is one needs from them, etc., become very
real factors determining where the boundaries of firms will be placed.1
The upshot of all this is that an analysis of organisational cognition, for example,
along the lines pioneered by Edith Penrose and founded on the idea of the image, may
provide an alternative to existing contractual theories of the boundaries of the firm
(Alchian and Demsetz, 1972; Williamson, 1985, 1996; Hart, 1995). Moreover, it may
strengthen the capabilities theory on this subject (Foss, 1993; Langlois and Robert-
son, 1995; Langlois and Foss, 1999), which has merely started from the empirical
generalisation that firms control different production and organisation knowledge,
without fundamentally enquiring into why this should be the case.

V. CONCLUSION
The purpose of this paper has been to argue that Penrose’s crucial ideas are far from
perfectly absorbed in contemporary thinking in strategy (or in the theory of the firm,
for that matter). The dominant economic approaches to strategy—the RBP and the
industrial organisation—both follow the usual explanatory approach in mainstream
economics of assuming a perfect world and then introducing few spanners in the
works. Both stress that competitive advantage should be understood in terms of rents
existing in equilibrium, and both trace the sources of these rents to imperfections in
the factor market.
Penrose’s view is very far from this. Not only is she not interested in whether there
may be rents/competitive advantage in equilibrium per se, she also has a completely
different basic outlook. Her world is one characterised by disequilibrium, learning,
experimentation, and change; it is a world in which people adopt or become socialised
into cognitive frameworks that allow them to make some sense out of the world, and
where the co-ordination of their actions is dependent upon the sharing of such frame-
works. Strategy research still has a long way to go before it will catch up with Edith
Penrose’s four decades old insights. As Pitelis and Wahl (1998) argue, much the same
may be said with respect to organisational economics.

REFERENCES
ALCHIAN, A. A. and DEMSETZ H. (1972). Production, information costs, and economic organiz-
ation, in Economic Forces at Work, edited by, A. A. ALCIAN. Indianapolis, Liberty Press.
ANDREWS, K. (1971). The Concept of Corporate Strategy, Homewood, IL, Richard D. Irwin,
[1980].
ANDREWS, P. W. S. (1949). Manufacturing Business, London, Macmillan.
ANSOFF, I. (1965). Corporate Strategy, New York, Wiley.
BAIN, J. S. (1959). Industrial Organization, New York, Wiley.

1
One is reminded of the, possibly apocryphical, story about the Japanese supplier firm, committed to total
quality, zero defects managements, that unable to make sense of a requirement from its American buyer of
95 per cent defect free deliveries sent a separately boxed batch of 5 per cent deliberately broken parts and a
note saying ‘We don’t know why you want these’.
102 N. J. FOSS

BARNEY, J. B. (1985). Strategic factor markets, Management Science, Vol. 32, 1231–41.
BARNEY, J. B. (1991). Firm resources and sustained competitive advantage, Journal of Manage-
ment, Vol. 17, 99–120.
BAUMOL, W. J. (1962). On the theory of expansion of the firm, American Economic Review, Vol.
52, 1078–87.
BEACH, L. R. (1993). Image Theory: Decision Making in Personal and Organizational Contexts,
Chichester, Wiley.
BEST, M. H. and GARNSEY, E. (1999). Edith Penrose 1914–1996, Economic Journal, Vol. 109,
F187–F201.
BOULDING, K. E. (1956). The Image, Ann Arbor, Michigan University Press.
BOWER, J. (1970). Managing the Resource Allocation Process, Boston, Harvard Graduate School of
Business Administration.
BRANDENBURGER, A. and NALEBUFF, B. (1996). Co-opetition, New York, Doubleday.
CAVES, R. (1984). Economic analysis and the quest for competitive advantage, American
Economic Review, Papers and Proceedings, Vol. 74, 127–32.
CHANDLER, A. D. (1962). Strategy and Structure, Cambridge, MA, MIT Press.
COASE, R. H. (1937). The nature of the firm, Economica, Vol. 4, 386–405.
COHEN, W. M. and LEVINTHAL, D. (1990). Absorptive capacity: a new perspective on learning
and innovation, Administrative Science Quarterly, Vol. 25, 128–152.
DEMSETZ, H. (1973). Industrial structure, market rivalry, and public policy, Journal of Law and
Economics, Vol. 16, 1–10.
DEMSETZ, H. (1982). Barriers to entry, in Efficiency, Competition, and Policy, Oxford, Basil
Blackwell.
DIERICKX, I and COOL, K. (1989). Asset stock accumulation and the sustainability of
competitive advantage, Management Science, Vol. 35, 1504–11.
DOSI, G. and MARENGO, L. (1994). Some elements of an evolutionary theory of organizational
competences, in Evolutionary Concepts in Contemporary Economics, edited by R. W.
ENGLANDER, Ann Arbor, The University of Michigan Press.
DOWNIE, J. (1958). The Competitive Process, London, Duckworth.
EARL, P. E. (1996). Shackle, entrepreneurship, and the theory of the firm, in Interactions in
Political Economy, edited by S. PRESSMAN, London, Routledge.
FINCH, J. (1999). The methodological implications of post-Marshallian economics, in Economic
Knowledge and Economic Coordination: Essays in Honour of Brian Loasby, edited by P. EARL
and S. DOW, Aldershot, Edward Elgar.
FOSS, N. J. (1993). Theories of the firm: contractual and competence perspectives, Journal of
Evolutionary Economics, Vol. 3, 127–44.
FOSS, N. J. (1998). The competence-based approach: Veblenian ideas in the contemporary
theory of the firm, Cambridge Journal of Economics, Vol. 22, 479–96.
FOSS, N. J. (1999A). Equilibrium versus evolution in the resource-based perspective: Demsetz
vs Penrose, Resources, Technology and Strategy, edited by N. J. FOSS and P. L. ROBERTSON,
London, Routledge.
FOSS, N, J. (1999B). Edith Penrose and the Penrosians—or, why there is still so much to learn
from The Theory of the Growth of the Firm, in Cahiers de l’ISMEA.
FOSS, N. J. (1999C). Research on the strategic theory of the firm: ‘isolationism’ and
‘integrationism’, Journal of Management Studies, in press.
FRANSMAN, M. (1994). Information, knowledge, vision, and theories of the firm, Industrial and
Corporate Change, Vol. 3, 713–57.
GANDER, J. P. (1991). Managerial intensity, firm size, and growth, Managerial and Decision
Economics, Vol. 12, 261–6.
GHEMAWAT, P. (1991). Commitment, New York, The Free Press.
GHEMAWAT, P. (1997). Games Businesses Play: Cases and Models, Cambridge, MA, MIT Press.
 EDITH PENROSE AND STRATEGIC MANAGEMENT 103

GOLDSCHMID, H. J., MANN, J. H. and WESTON, J. F. eds. (1974). Industrial Concentration: The
New Learning, Boston, Little Brown.
HART, O. D. (1995). Firms, Contracts, and Financial Structure, Oxford, Clarendon Press.
HOLMSTRÖM, B. (1982). Moral hazard in teams, Bell Journal of Economics, Vol. 13, 324–40.
HOLMSTRÖM, B. and MILGROM, P. (1991). Multitask principal-agent analyses: incentive con-
tracts, asset ownership, and job design, Journal of Law, Economics, and Organization, Vol. 7,
24–52.
KAY, N. (1997). Pattern in Corporate Evolution, Oxford, Oxford University Press.
KOR, Y. Y. and MAHONEY, J. T. (1999). Penrose’s resource-based approach: the process and
product of research creativity, Journal of Management Studies, in press.
LANGLOIS, R. N. (1992). Transaction costs in real time, Industrial and Corporate Change, Vol. 1,
99–117.
LANGLOIS, R. N. and ROBERTSON, P. L. (1995). Firms Markets and Economic Change, London,
Routledge.
LANGLOIS, R. N. and FOSS, N. J. (1999). Capabilities and governance: the rebirth of production
in the theory of economic organization, KYKLOS, Vol. 52, 201–18.
LIPPMAN, S. A. and RUMELT, R. P. (1982). Uncertain immutability: an analysis of inter-
firm differences in efficiency under competition, Bell Journal of Economics, Vol. 13,
418–38.
LEWIN, P. and PHELAN, S. E. (1999). Rents and resources: a market process perspective,
mimeo, School of Management, University of Texas at Dallas.
LOASBY, B. J. (1983). Knowledge, learning and enterprise, in Beyond Positive Economics, edited
by WISEMAN, J., London, Macmillan.
LOASBY, B. J. (1991). Equilibrium and Evolution, Manchester, Manchester University Press.
MACHLUP, F. (1967). Theories of the firm: marginalist, behavioral, managerial, in The Method-
ology of Economics and Other Social Sciences, New York, Wiley.
MAHONEY, J. T. (1995). The management of resources and the resource of management,
Journal of Business Research, Vol. 33, 91–101.
MAHONEY, J. T. and PANDIAN, J. R. (1992). The resource-based view within the conversation of
strategic management, Strategic Management Journal, Vol. 13, 363–80.
MALMGREN, H. B. (1961). Information, expectations, and the theory of the firm, Quarterly
Journal of Economics, Vol. 75, 399–421.
MARCH, J. G. (1988). Decisions and Organizations, Oxford, Basil Blackwell.
MARCH, J. G. and SIMON, H. H. (1958). Organizations, New York, Wiley.
MARENGO, L. (1995). Structure, competence, and learning in organizations, Wirtschaftspolitische
Blätter, Vol. 6, 454–64.
MARRIS, R. (1964). The Economic Theory of Managerial Capitalism, London, Macmillan.
MILGROM, P. J. and ROBERTS, J. D. (1992). Economics, Organization, and Management, New
York, Prentice Hall.
MINTZBERG, H. (1990). Strategy formation: schools of thought, in Perspectives on Strategic
Management, edited by FREDERICKSSON, J. W., New York.
NELSON, R. R. and WINTER, S. G. (1982). An Evolutionary Theory of Economic Change,
Cambridge, Bellknap Press.
PENROSE, E. T. (1959). The Theory of the Growth of the Firm, Oxford, Oxford University Press
[1995].
PENROSE, E. T. (1968). Large International Firms in Developing Countries, London, George Allen
& Unwin.
PENROSE, E. T. (1971). The Growth of Firms, Middle East Oil, and Other Essays, London, Frank
Cass & Co.
PETERAF, M. A. (1993). The cornerstones of competitive advantage: a resource-based view,
Strategic Management Journal, Vol. 14, 179–91.
104 N. J. FOSS

PITELIS, C. N. and WAHL, M. W. (1998). Edith Penrose: pioneer of stakeholder theory, Long
Range Planning, Vol. 31, 252–61.
PORTER, M. E. (1980). Competitive Strategy, New York, Free Press.
PORTER, M. E. (1981). The contributions of industrial organization to strategic management,
Academy of Management Review, Vol. 6, 609–20.
RICHARDSON, G. B. (1972).The organisation of industry, Economic Journal, Vol. 82, 883–96.
RUBIN, P. H. (1972). The expansion of firms, Journal of Political Economy, Vol. 81, 936–49.
RUMELT, R. P. (1974). Strategy, Structure and Economic Performance, Cambridge, MA, Harvard
Business School Press.
SALONER, G. (1994). Game theory and strategic management: contributions, applications, and
limitations, in Fundamental Issues in Strategy: A Research Agenda, edited by R. P. RUMELT,
D. E. SCHENDEL and D. J. TEECE, Boston, Harvard Business School Press.
SCHERER, F. M. and ROSS, D. (1990). Industrial Market Structure and Economic Performance,
Boston, Houghton-Mifflin.
SCHMALENSEE, R. and WILLIG, R. D., eds (1989). Handbook of Industrial Organization,
Amsterdam, Noth-Holland.
SHACKLE, G. L. S. (1972). Epistemics and Economics, Cambridge, Cambridge University Press.
SHAPIRA, Z. (ed.) (1997). Organizational Decision Making, Cambridge, Cambridge University
Press.
SAPIRO, C. (1989). The theory of business strategy, RAND Journal of Economics, Vol. 20,
125–37.
SLATER, M. (1980). The managerial limitation to a firm’s rate of growth, Economic Journal, Vol.
90, 520–8.
STIMPERT, C. I. (1989). Managerial cognition: a missing link in strategic management research,
Journal of Management Studies, Vol. 26, 325–47.
TEECE, D. J. (1982). Toward an economic theory of the multiproduct firm, Journal of Economic
Behaviour and Organization, Vol. 3, 39–63.
TIROLE, J. (1988). The Theory of Industrial Organization, Cambridge, MA, MIT Press.
TREADWAY, A. B. (1970). Adjustment costs and variable inputs in the theory of the competitive
firm, Journal of Economic Theory, Vol. 2, 329–47.
WEICK, K. (1995). Sensemaking in Organizations, London, Sage.
WERNERFELT, B. (1984). A resource-based view of the firm, Strategic Management Journal, Vol.
5, 171–80.
WILLIAMS, J. R. (1994). Strategy and the search for rents: the evolution of diversity among
firms, in Fundamental Issues in Strategy Research, edited by R. P. RUMELT, D. SCHENDEL
and D. J. TEECE, Boston, Harvard Business School Press.
WILLIAMSON, O. E. (1985). The Economic Institutions of Capitalism, New York, Free Press.
WILLIAMSON, O. E. (1996). The Mechanisms of Governance, Oxford, Oxford University Press.