The concept and context of capabilities The term ‘capabilities’ was introduced to economics by Richardson (1972). As he makes clear, his analysis is developed from Penrose’s (1959, 1995: 245) conception of a firm as a collection of physical and human resources which may be deployed in a variety of ways to provide a variety of productive services. Penrose explicitly avoids the term ‘factors of production’ because it fails to distinguish between resources and the services that they yield and thus obscures the range of orientations that may be implicit in any collection of resources, which is essential to her explanation of the growth and distinctiveness of firms. Richardson insists on a similar distinction.