Edith Penrose and the Theory of the Multinational Enterprise

Edith Penrose had a unique view of the multinational enterprise (MNE). She analyzed the MNE as a multiplant firm. Just like domestic (uninational) firms, the size of the MNE is a function of the rate of growth of the firm and time elapsed. For a multinational firm, growth is, therefore, explicable by the same factors as a uninational firm. In essence, the size of the firm is a less interesting question, both theoretically and empirically for Penrose than is the growth of the firm. A firm’s size is merely a snapshot at a given point of time in its growth trajectory because it is a static frozen picture of a dynamic process. Penrose had a singular take on international management, arguing that foreign subsidiaries require less administrative coordination than domestic equivalents. Similarly, her view of “foreignness” does not require a special theory of the MNE since it treats MNEs as a simple extension of the multiplant domestic firm. Penrose introduced innovations into the theory of the MNE based on “speed of entry” into foreign markets.