The Theory of the Growth of the Firm

This chapter comprises a description of Edith’s influential book, The Theory of the Growth of the Firm, how it came to be written, and its main arguments. It is often called revolutionary. She showed that the human resources required for the management of change are tied to the individual firm and so are internally scarce. As management tries to make the best use of the resources available, a ‘dynamic’ interacting process occurs which encourages growth but limits the rate of growth. The book was an important step towards modern, liberally minded management concepts, developing the resource-based and knowledge-based perspective, and ultimately including the theory of stakeholding, in which the interests of employees, customers, and the community count alongside those of shareholder owners.