The competence-based approach: Veblenian ideas in the modern theory of the firm

Abstract

I argue that a contemporary stronghold of a number of Thorstein Veblen's crucial ideas can be found in the emerging competence-based approach to the firm (e.g., Penrose, Chandler, Winter). For example, the emphasis in this literature on firms as path-dependent entities characterised by their heterogeneous and group-based knowledge bases can be linked with key themes in Veblen's work. Thus, the paper presents the competence-based approach as a modern Veblenian approach. Moreover, the Veblenian aspects of the competence-based approach are also those aspects that most differentiate it from the other dominant economic approach to the firm, the contractual approach (e.g., Alchian and Demsetz, Williamson, Grossman and Hart). The aim of the paper is both to make this historical point and to present a contemporary body of theory that may with some justice be called Veblenian.