Although Penrose did not address the issue of growth in new firms, she provided the conceptual base for an analysis of this kind. A theory of new venture formation and early growth is presented here which is inspired by Penrose's analysis of the subsequent growth of existing firms. New firm growth reflects problem solving and competence-building processes, solutions giving rise to new problems. Growth reinforcing and growth restraining factors contend to shape the firm's progress. The model relates the growth of the firm to the building of competence and distinctive capabilities appropriate to shifting market opportunities. This approach is congruent with work on the new firm as a complex dynamic system.