Globalization, Development, and History in the Work of Edith Penrose

Abstract

The paper assesses the contribution of Edith Penrose to the theory of the multinational enterprise (MNE) and the political economy of globalisation and development as they relate to (her views on) business history, on occasion of the 50th Anniversary of her classic 1959 book and her 1960 prize-winning paper on “Hercules Powder”, published in this Review. We claim that Penrose came close to providing a theory of ‘internalisation’, compared foreign direct investment (FDI) to market-type contracting relationships, and even discussed transaction costs-related arguments. However, overall she took the existence of firms for granted and did not try to address the question why firms exist vis-à-vis alternatives, such as markets. It was left to Stephen Hymer to answer this Coasean question for the case of the MNE. However, Penrose’s views on the political economy of globalization, MNE-state relationships, and development have proven to be incisive, mostly accurate and ahead of their time – they are currently at the forefront of recent debates and calls to leverage history for theory development.

Keywords: Penrose, MNE, globalization

JEL Classification: P16, F23