It's a perennial debate among entrepreneurs and those who aspire to join their ranks: Do you really need a business-school degree, or is the world of work a better teacher?

That's a question each person must wrestle with given their own opportunities and interests, but now there's a new study reporting that what is learned in MBA programs really affects corporate decisions and directions.

A report published Aug. 8 in the Harvard Business Review explores the question of whether or not business-school education really lasts after students have hung up their graduation gowns and mortarboards. When MBAs eventually climbed into positions of power at major corporations and financial institutions, did that education affect the decisions they make?

You might expect this answer from a publication affiliated with a famously expensive university, but the study says yes, those classes and lectures really do translate to corporate life.

Jiwook Jung, an assistant professor at the University of Illinois, and Taekjin Shin, an associate professor at San Diego State University collected data on more than 2,000 CEOs who ran 640 large American corporations between 1985 and 2015.

The researchers focused their interest on the CEOs' decisions about corporate diversification, meaning the attempts of companies to branch beyond their core fields into other markets or industries. Their reasoning was that business scholars have "drastically changed their views" about the topic over three decades. This allowed them to determine if the students-turned-workers behaved differently based on what and when they were taught.

Why this topic? Corporate diversification was viewed as valuable up until the 1960s, the researchers state, then viewed skeptically in the 1970s and outright criticized in the 1980s. Many firms, however, remained committed to diversifying well into that neon-splashed decade. The researchers believe that accepted corporate strategy wouldn't change until a new crop of younger decision makers, who'd been taught differently, rose to power.

And their theory proved correct: Compared with CEOs without MBAs, CEOs who earned MBAs before the 1970s were 17 percent more likely to pursue diversification; in short, adopting the theories they were taught in business school. As a younger crop of MBA-holders moved up, they were much less likely to pursue diversification at their companies than their non-MBA counterparts. Again, that's reflecting what they'd been taught.

"Our findings are pertinent to those who teach in business schools and other professional programs," the report says. "Although some academics deplore how little influence management theory has on business practices and society, our study demonstrates that it does seem to have an impact in the long run."

The results aren't instant -- it takes time for former students to move up in the ranks. But there is a campus-to-corporate connection, the study says, for better or for worse. So as business professors shift what they're teaching, the new lessons slowly spread into the corporate universe.

The study's implications go well beyond the diversification topic. The professors cite the work of late scholar Sumantra Ghoshal, who warned that business schools have moved towards a scientific model that in some ways can remove individual morality from the equation. Doing so, Ghoshal wrote, may have contributed to major corporate scandals and crises. If this is so, perhaps an emphasis on corporate ethics at colleges and universities could affect the business world for the better.

"As more students, scholars, leaders, and pundits are now reflecting on the influence of business schools, it is precisely the time when business educators should realize their responsibility and potential," the researchers conclude. "What they teach matters, and their impact on society becomes clear only after many years."

Published on: Aug 10, 2018
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