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

Abstract

This paper provides a formal model of Edith Penrose's Theory of the Growth of the Firm which has important implications for the strategy of multinational enterprises. The model provides an analysis of the trade-off between product diversification and foreign market penetration. It also can account for the speed of entry into foreign markets. Formalizing Penrose's Theory of the Growth of the Firm provides an account of internationalization incorporating geographical expansion patterns, sequential decision making and learning.