Edith Penrose in the New Economy

Edith Penrose’s theory eminently fit the mid-twentieth century firms and industries that she studied. What would she say about the very different firms in today’s New Economy? To tackle this question, I update Penrose’s original model with new theories of the firm that emerged after she wrote, including economics of contracting and of the new digital economy. I find that these new theories fit well with her concepts and help complete Penrose’s model. I explore in particular how firms in the New Economy leverage their internal resources by using alliances, ecosystems, and platforms to access the services of external resources. These strategies expand what Penrose called the pool of resources available to the firm, even though they are governed by administrative mechanisms that she did not originally contemplate. We can now see that, while the firm is a bundle of resources, as she explained, not all bundles of resources are firms. In the New Economy, these other kinds of bundles are as important as classic firms.