. . . And If You Can’t Teach, Teach Gym

27 October 2007 at 10:14 am 5 comments

| Peter Klein |

You know the old adage: If you can, do; if you can’t, teach. Is it true for business?

A paper in the August 2007 Academy of Management Perspectives, “Do Business School Professors Make Good Executive Managers?” by Bin Jiang and Patrick Murphy (full text; abstract; press release), identifies 217 firms with former business-school professors in management positions and finds that these firms have higher revenues-per-employee than a control group matched by industry, location, and firm size. Faculty making early exits from their academic careers appear to be the most valuable, while neither academic area nor business-school ranking seem to matter. Conclusion:

Executive managers learn from past experiences when they draw the right lessons from those experiences. But experience alone is not enough. Given the rigorous training professors receive in order to design research that objectively parses error and data, one final supposition is that they may be particularly competent at delineating patterns in complex management and organizational experiences. They may also be especially capable of continually developing innovative questions that lead to information useful for executive decision-making amidst uncertainty.

I enjoyed reading the paper. Certainly I like to think that I’d command a high salary if I chose to give up my cushy professor lifestyle for the real world. However, I don’t find the empirical analysis convincing. Here’s why:

The study does not control for two potential sources of selection bias. First, business-school professors choosing to go into industry may systematically select high-performing firms. For voluntary exits (i.e., excluding tenure denials), this is exactly what we would expect. Second, business professors who become executives are not a random sample of all business professors. Those with particular attributes (good judgment, charisma, leadership skill) are more likely to have extramural professional opportunities than the nerdier types. In other words, the results do not tell us whether these highly valued executives are highly valued because they used to be professors — as the authors imply — or in spite of it. (Or independent of it.)

How to improve the analysis? Some suggestions:

  • Try to control for professor-specific characteristics in some kind of two-stage (e.g., Heckman) model.
  • Use panel data with fixed effects to see how the performance of a given firm changes when an ex-professor is added to the executive team.
  • Look for instruments for the firm’s decision to hire a former professor (i.e., variables uncorrelated with current or expected future firm performance). Proximity to a top business school, perhaps? A CEO with a degree from the ex-professor’s institution? There must be a good instrument out there somewhere. . . .

Entry filed under: - Klein -, Methods/Methodology/Theory of Science, Teaching. Tags: .

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5 Comments Add your own

  • 1. Gary  |  27 October 2007 at 11:17 pm

    Let’s see:

    “…Certainly I like to think that I’d command a high salary ”
    “…than the nerdier types”
    “…Use panel data with fixed effects ”

    As the old Sesame Street song goes: One of these things is not like the others…

    I couldn’t resist.

  • 2. John  |  28 October 2007 at 11:04 am

    Hi there. We had to read and discuss this paper and I found your blog.

    On selection bias:

    “First, business-school professors choosing to go into industry may systematically select high-performing firms. For voluntary exits (i.e., excluding tenure denials), this is exactly what we would expect.”

    ***The study replicated the analysis on non-business school professors with null results, which diminishes this alternative explanation. (I.e., they did the kind of thing you recommend in your first bullet point, they also looked at effects related to top b-schools.) And tenure denials were a significant part of the sample.

    “Second, business professors who become executives are not a random sample of all business professors. Those with particular attributes (good judgment, charisma, leadership skill) are more likely to have extramural professional opportunities than the nerdier types. In other words, the results do not tell us whether these highly valued executives are highly valued because they used to be professors — as the authors imply — or in spite of it. (Or independent of it.)”

    ***The authors do not imply biz profs are valued because they were formerly professors. Quite the opposite in the business world, actually, especially in big companies like the ones in the study’s sample. However, the design of the study neutralizes that negative value. The research question is whether profs can walk the walk. To examine that question one MUST examine profs who became executives. It’s the only way. That’s what this study did. Otherwise, the only contribution to be made is based on opinon and anecdote. The study did use a random sample of the population in which it is interested. Finally, all professors go through similar training, selection processes, which all take years. It is perfectly reasonable to expect ones who exit academia to share much reliable variance in common with those who remain in academia.

    Best,
    John

  • 3. linda m lopeke  |  29 October 2007 at 10:05 am

    It’s also true that great managers have made excellent professors!

    Linda M. Lopeke

    http://www.smartstartcoach.com

  • 4. REW  |  29 October 2007 at 12:28 pm

    Outstanding managers, outstanding teachers, and superb lovers all share one thing in common: a highly developed

  • [...] tip to the Organization and Markets [...]

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