Geography Reference
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problems is seen as a general policy for growth, concomitant with the
development of the technological base of the firm.
Penrose distinguishes between two kinds of knowledge: 'objective'
knowledge, which is codifiable and transmittable, and 'experience', which
results from learning and can only be transferred to a limited extent. All
activities or functions carried out within the firm generate new knowledge
through intra-firm learning, resulting in 'excess' resources that can moti-
vate growth and further innovation. Resources and their services are thus
the engines of the firm's growth, whilst the mechanism of transmission
is the learning process. Changes in the productive opportunities of firms
are intrinsically associated with knowledge increases ''built into” the very
nature of firms (Penrose 1959, p. 78). The importance of increased knowl-
edge in the external world should not be ignored (see, for example, p. 79),
but the focus is indeed on the experience and knowledge of the manage-
ment, as the latter also determines what the firm ''sees” in the external
world' (p. 80).
Edith Penrose can be viewed as the forerunner of modern 'managerial'
theories, pursuing economics in a manner that was common before the
neoclassical paradigm became dominant. Subsequent managerial develop-
ments of Penrose's ideas are grouped under the heading of the Resource-
Based View (RBV) of the firm. Drawing on Penrose, although not always
explicitly, in the RBV the firm is seen as a bundle of organized resources,
which are idiosyncratic, relatively immobile and built cumulatively over
time, and the task of its management is to adjust and renew the firm's
resources as time, competition and change erode their value (Wernerfelt
1984; Rumelt 1984; Foss 1997a, b, 1998).
In the last few decades, Penrose's contribution and the RBV develop-
ments have acquired significant recognition in many circles, arguably
challenging transactions costs as the leading alternative economic theory
of the firm. Curiously, however, both Penrose's work and the RBV exten-
sive literature has found comparatively limited application in relation to
MNEs (Pitelis 2007a). This is even more surprising because, as mentioned
in Chapter 2, Penrose herself carried out substantial work on MNEs (e.g.,
Penrose 1956, 1968, 1990), and had obviously the multinational corpora-
tion in her mind when writing about the growth of the firm (see her own
foreword to the third edition of The Theory of the Growth of the Firm ,
Penrose 1995). As pointed out by Pitelis (2007a, b), the major reason for
such an apparent anomaly is that Penrose saw multinationality simply as
a natural result of the growth process. Therefore, in her seminal contribu-
tion of 1959, she did not devote particular attention to distinguishing the
features of the phenomenon per se, though her applications of the firm
as an 'evolving collection of resources' were made with particular refer-
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