Edith Penrose quote: “Internal inducements to expansion arise largely from the existence of a pool of unused productive services, resources a…”

“A firm is essentially a pool of resources the utilization of which is organized in an administrative framework.”

Edith Penrose (1914–1996) economist

p 149
The Theory of the Growth of the Firm, 1959

“The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization—to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization.”

Harold Demsetz (1930–2019) American economist

Source: Production, information costs, and economic organization. 1972, p. 777, Lead paragraph

“The mark of a capitalistic society is that resources are owned and allocated by such nongovernmental organizations as firms, households, and markets. Resource owners increase productivity through cooperative specialization and this leads to the demand for economic organizations which facilitate cooperation. When a lumber mill employs a cabinetmaker, cooperation between specialists is achieved within a firm, and when a cabinetmaker purchases wood from a lumberman, the cooperation takes place across markets (or between firms). Two important problems face a theory of economic organization—to explain the conditions that determine whether the gains from specialization and cooperative production can better be obtained within an organization like the firm, or across markets, and to explain the structure of the organization.”

Armen Alchian (1914–2013) American economist

Source: Production, information costs, and economic organization. 1972, p. 777, Lead paragraph

“Most large industrial concerns are limited by policy to special directions of expansion within the well-established field of the company.”

Edwin H. Land (1909–1991) American scientist and inventor

Congressional testimony (1945)
Context: Most large industrial concerns are limited by policy to special directions of expansion within the well-established field of the company. On the other hand, most small companies do not have the resources or the facilities to support "scientific prospecting." Thus the young man leaving the university with a proposal for a new kind of activity is frequently not able to find a matrix for the development of his ideas in any established industrial organization.

“Why… are there any market transactions at all? Why not all production carried on by one big firm?… First, as a firm gets larger, there may be decreasing returns to the entrepreneur function, that is, the costs of organizing additional transactions within the firm may rise… Second, it may be that as the transactions which are organized increase, the entrepreneur fails to place the factors of production in the uses where their value is greatest, that is, fails to make the best use of the factors of production… Finally, the supply price of one or more of the factors of production may rise, because the "other advantages" of a small firm are greater than those of a large firm.”

Ronald H. Coase (1910–2013) British economist and author

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 394-5

“Difficulties arise when an attempt is made to acclimatize the theory to an alien environment and, in particular, to adapt the analysis of the expansion of the innovating multi-product, ‘flesh and blood’ organisations that businessmen call firms.”

Edith Penrose (1914–1996) economist

Source: The Theory of the Growth of the Firm, 1959, p. 13

“It is traditional in the theory of the firm to define the production opportunity set available to the firm in terms of its boundary -- the maximum attainable set of output quantities for various input quantities, given the state of technology and knowledge. This boundary is the production function of the firm. One of our purposes here is to point out the dependence of such production functions on the structure of property rights and contracting rights within which the firm exists. We redefine the production function in order to recognize the dependence of output on the structure of property and contracting rights. That expanded framework is then used to discuss a concrete set of problems surrounding the role of labor in the firm ranging from the 'labor-managed firm' system (in which tradable capital value residual claims [common stock] are legally prohibited), and the codetermination and industrial democracy movements (in which management participation by labor is required by law), to cooperatives and professional partnerships (i. e., quasi-labor-managed firms which arise out of the voluntary contracting process), and the capitalist corporation.”

Michael Jensen (1939) American economist

Michael C. Jensen and William H. Meckling. "Rights and production functions: An application to labor-managed firms and codetermination." Journal of business (1979): 469-506.

“Another evil, and one of the worst which arises from the separation of theoretical and practical knowledge, is the fact that a large number of persons”

William John Macquorn Rankine (1820–1872) civil engineer

"On the Harmony of Theory and Practice in Mechanics" (Jan. 3, 1856)
Context: Another evil, and one of the worst which arises from the separation of theoretical and practical knowledge, is the fact that a large number of persons, possessed of an inventive turn of mind and of considerable skill in the manual operations of practical mechanics, are destitute of that knowledge of scientific principles which is requisite to prevent their being misled by their own ingenuity. Such men too often spend their money, waste their lives, and it may be lose their reason in the vain pursuits of visionary inventions, of which a moderate amount of theoretical knowledge would be sufficient to demonstrate the fallacy; and for want of such knowledge, many a man who might have been a useful and happy member of society, becomes a being than whom it would be hard to find anything more miserable.
The number of those unhappy persons — to judge from the patent-lists, and from some of the mechanical journals — must be much greater than is generally believed.<!--p. 176

“A firm consist of the system of relationships which comes into existence when the direction of resources is dependent on an entrepreneur.”

Ronald H. Coase (1910–2013) British economist and author

Source: 1930s-1950s, "The Nature of the Firm" (1937), p. 393

“The people of the United States will not tolerate another deep depression that arises not from any lack of natural resources, productive capacity or man and brain power, but solely from imperfections in the functioning of the system of finance capitalism.”

Benjamin Graham (1894–1976) American investor

Part V, Chapter XIX, The Reservoir Plan and Tradition, p. 234 (See also; Karl Marx, Capital)
Storage and Stability (1937)

“Internal inducements to expansion arise largely from the existence of a pool of unused productive services, resources and special knowledge, all of which will always be found within any firm.”

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