Regional growth dynamics: a capabilities perspective

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Abstract
The purpose of the paper is to extend Edith Penrose's theory of the growth of the firm to account for inter-firm and regional growth dynamics. To explain the growth of the firm, Penrose developed a resource creation perspective based on a dynamic between productive capabilities and market opportunities. She was not the first to call attention to a resource creation process. As Brian Loasby (this issue) has demonstrated, both Penrose's resource creation and the resource co-ordination perspective of conventional microeconomics can be traced to Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776. As the title of the classic text suggests, Smith was concerned with wealth creation. Loasby and George Richardson (this issue) make strong arguments that the two perspectives can be integrated. They may be right but it will require a substantial rethink of the relations between the firm and the market in ways which give integrity to industrial organisation and regional growth dynamics. In either case, Penrose's growth dynamics is a concept rich with implications for economic analysis that have yet to be drawn out.

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