Organizations and Markets

| Randy Westgren |

Before enplaning for Vancouver, I spent a great day at the University of Missouri with Peter Klein and his (local) colleagues. I discovered that Peter and I share a common interest in the fiction of Richard Powers, a novelist whose works draw from the biological, physical, cognitive, and information sciences. Moreover, Peter acknowledged that his favorite Powers novel is The Gold Bug Variations; it’s my favorite as well. I finished my second reading on the airplane and found a passage that incites this post:

The world we know, the living, interlocked world, is a lot more complex than any market. The market is a poor simulation of of the ecosystem; market models will never more than parody the increasingly complex web of interdependent nature. (First edition, p. 411)

I agree that market models are pale abstractions compared to any ecosystem. But I have studied a great many models of ecosystems (dynamic system simulations, agent-based simulations, statistical models of species interactions, analytical models of populations) and find them to be pale abstractions of ecosystems, as well. I will propose — for refutation — that most market models I see are less interesting than ecosystem models; they are still undersocialized in the Granovetter sense. The ecological models seem to require more attention paid to the social interactions of the individuals.

Just a thought.

| Peter Klein |

The University of Colorado invites law professors to a one-day workshop, 11 June 2008, on the new institutional economics. Speakers are Lee Alston, Lynne Kiesling, Gary Libecap, Henry Smith, and Tom Ulen. Contents include:

(1) an introduction to NIE and why it matters to legal scholarship, particularly for property and intellectual property law; (2) an introduction to behavioral economics and experimental economics, including a simulation exercise that will demonstrate how experimental economics can be used to examine institutions in practice; and (3) an interactive discussion where all participants examine some case studies to evaluate the payoffs of using NIE and experimental economics to evaluate the merits of different legal regimes.

Sounds like fun (but where’s the theory of the firm?). Thanks to Thom Lambert, one of the lucky attendees, for the heads-up.

| Randy Westgren |

One of the profoundly valuable benefits of recently giving up an administrator’s position is that I have time to read. I sat down with a stack of journals, biographies, fiction, and cookbooks that has grown since last summer. In the first pass through the stack, I found a couple pieces that echo one of the themes of this blog: how our training affects our perceptions of theory, facts, and phenomena.

One piece is an article by two young, interesting colleagues, Brianna and Arran Caza, who write about “Positive Organizational Scholarship” (POS) in the March 2008 issue of the Journal of Management Inquiry . They argue that the bulk of research on organizations, as highlighted by the top-cited articles in three years of ASQ and AMJ, begin with negative framing of organizational issues — what Brianna and Arran call a deficit model approach. They propose the need for research based on positive framing — not exclusively — as necessary to advance theory and practice in the organizational sciences. The POS paradigm is unabashedly post-modern (up periscope!), but it serves us all when alternative lenses are trained on issues that we all observe from our particular perspectives. (more…)

| Peter Klein |

It’s Zachary Schrag’s “How Talking Became Human Subjects Research: The Federal Regulation of the Social Sciences, 1965-1991,” forthcoming in the Journal of Policy History.

In universities across the United States, institutional review boards, or IRBs, claim that they have the moral and legal authority to control the work of researchers in the humanities and social sciences. While IRBs may claim powers independent of federal regulations, they invariably point to these regulations as a key source of their authority. This article draws on previously untapped manuscript materials in the National Archives to trace the history of the federal regulation of social science research. Officials raised sincere concerns about dangers to participants in social science research, especially the unwarranted invasion of privacy as a result of poorly planned survey and observational research. On the other hand, the application of the regulations to the social sciences was far less careful than was the development of guidelines for biomedical research. Regulators failed to define the problem they were trying to solve, then insisted on a protective measure borrowed from biomedical research without investigating alternatives.

See also Schrag’s valuable Instituitional Reveiw Blog.

IRB oversight is particularly strong at the University of Missouri, across all departments, partly the result of a federal investigation in 1999 that came down hard on the medical school. One might wonder what this has to do with social-science research, but there you go.

| Peter Klein |

From Marshall Jevons I just learned about the Authors@Google lecture series. Lots of good stuff there. The O&M crowd may especially enjoy the talks by Ian Ayres, Larry Lessig, Bob Litan, Richard Florida, John Searle, Daniel Solove, Steven Pinker, Robert Frank, Don Tapscott, Bill Easterly, and Tom Perkins.

Update: If you like this sort of thing check out TED as well (thanks to Art Carden for the pointer). The first person I saw when I visted the site yesterday was Yochai Benkler, whose book The Wealth of Networks I happen to be reviewing for The Independent Review.

| Peter Klein |

The Erasmus Journal for Philosophy and Economics is a new journal focusing on economic methodology, the history of economic thought, relationships between economics and other disciplines, and similar “meta” issues. Here’s the call for papers for the inaugural issue. The journal advertises that it is “particularly friendly to Young Scholars (graduate students and recent PhD graduates).”

| Peter Klein |

To many critics economics goes astray in characterizing people as isolated, autistic, self-interested, individualistic utility maximizers, unconnected from the broader social fabric in which they are embedded. The celebrated Ferraro, Pfeffer, and Sutton paper (AMR, 2005), and the broader “performativity” critique of economics, is a typical example of this attitude. Some heterodox economists even long for a “post autistic” version of the discipline.

As emphasized repeatedly on this blog, however, the criticism is fundamentally mistaken. At heart, it confuses methodological individualism with ontological individualism. The assumption of individual utility maximization, the simplified model of an isolated individual, and the like are principles of explanation, not descriptions (or, a fortiori, prescriptions). Now, I do think that economists have gone astray by emphasizing “rationality,” modeled with consistent preferences, a utility function that is monotonic and non-decreasing, etc., rather than the broader concept of “purposeful action,” as Mises described it, which is what most economists before the formalist revolution seemed to have had in mind. (more…)

| Peter Klein |

I finally got around to seeing No Country for Old Men, which I enjoyed despite unrealistically high expectations (movies too suffer from the winner’s curse). Javier Bardem’s Anton Chigurh surely belongs with Darth Vader, Hannibal Lecter, Dr. Christian Szell, Nurse Ratched, and Max Cady on the list of all-time great movie villains. The movie is in one sense a meditation on the role of chance in human affairs, so naturally I started thinking about risk, uncertainty, choice, delegation, and other issues near and dear to our organizational hearts. 

Chigurh, the cold-blooded killer, likes to flip a coin before deciding whether to kill someone, forcing the victim to call the toss. This reminded me that risk and Knightian uncertainty aren’t mutually exclusive determinants of economic outcomes. Entrepreneurs choose to invest in risky projects, but project selection itself reflects the bearing of Knightian uncertainty. Richard von Mises gives the example of champagne bottles that burst while in storage with predictable frequencies. The champagne producer can quantify the risks associated with bottling and storage. But the choice of producing one variety or another, hiring one type of laborer or another, and even being in the champagne business at all, involves another kind of uncertainty, one that cannot be described with mathematical precision. The decision to enter the champagne business involves Knightian uncertainty, but once that decision has been made, some of the variation in outcome can be characterized as probabilistic risk. Think of it in terms of mixed strategies; the specific move is random, but the decision to play a mixed strategy is not. Likewise, Chigurh can hardly claim that his victims’ deaths are random. A coin flip determines their fate, but he chooses to flip the coin — and that choice cannot be explained by a known probability distribution. (more…)

| Peter Klein |

Quantitative analysis leads to superior decision making, says Ian Ayres in Supercrunchers. Enthusiasts for expert systems are skeptical of “intuitive” reasoning. And most contemporary social scientists can’t conceive of a world without econometrics, sociometrics, psychometrics, and fill-in-the-blank-ometrics. Even management scholars are getting into the act. Of course, quantitative analysis is only as good as the assumptions that go into it. And economists such as Knight and Mises maintain that some kinds of human decision-making defy quantification and systematization and are fundamentally qualitative, or verstehende (explaining why some entrepreneurs earn profits while others make losses).

Wharton’s Gavin Cassar studies nascent entrepreneurs (defined here as firm founders) and finds, surprisingly, that those who use common accounting practices such as budgeting, sales forecasting, and financial planning are more likely to overestimate future performance than those who rely on qualitative, intuitive projections. “[T]hose individuals who adopt an inside view to forecasting, through the use of plans and financial projections, will exhibit greater ex-ante bias in their expectations. Consistent with inside view adoption causing over-optimism in expectations, I find that the preparation of projected financial statements results in more overly-optimistic venture sale forecasts.” In other words, quantitative analysis may exacerbate, rather than mitigate, cognitive bias. Worth a read (and see this summary in Knowledge@Wharton).

| Peter Klein |

I always suspected it: scholarly productivity is inversely related to — beer. That’s the finding of a new study of Czech ornithologists, as summarized in yesterday’s N.Y. Times (thanks to Brian McCann for the heads-up). The more beer a scientist drinks, the less likely he is to publish or to have his work cited. Apparently this is a cross-sectional result, without fixed effects or instrumental variables, so there is little information on causality. Perhaps unsuccessful Czech scientists tend to drown their sorrows at the local pub (no doubt drinking their copycat Budvar). Personally, I am more likely to grab a brew to celebrate the occasional citation, so I’d expect the correlation (under reverse causality) to run the other way. And what about these rats?

| Peter Klein |

Tom Lessl, who’s work on the history of science we’ve mentioned before, offers some interesting reflections on scientific rhetoric in this 2005 interview.

There is a popular and widespread misconception in the world that scientific communication is distinctly different from other forms of public communication, but this is not really so. Its persistence is explained by an old adage in my field, which I think comes from Roderick Hart at the University of Texas, which says that rhetoric is most effective which disguises itself as something else. And I would have to say that science is the master of disguises. . . .

In saying this I am not trying to suggest that science is not a profoundly powerful form of inquiry, that its truth claims are without substance or that many scientific questions cannot be answered with a definitive yes or no. But scientific communication has all the same kind of properties that we typically find in other arenas of communication.

This misconception, Tom argues, is actively promoted by scientists themselves, primarily as a means of securing resources:

What I call science’s “priestly voice” is the outcome of several hundred years of experimentation with different ways of relating itself to its patrons. Patronage is a perennial problem for science, one of huge proportions. Science is at once an exceedingly costly undertaking and also one that does not necessarily offer any immediate return on investments. We all know that science has produced applications of immeasurable benefit, but in history when scientific patronage has been dependent upon the promise of such payoffs, science work has suffered. This is because most of what we call basic science is exploratory and can’t promise applications. It produces knowledge that winds up in science journals but not in pharmaceutical patents or medical applications. The characteristic expectation of Americans that science is valuable because it pays off has traditionally deterred scientific growth. This was why the U.S. remained a backwater province of theoretical science until after WWII — when the public began to realize that theory might pay off in things like atom bombs. But more generally, scientific culture has responded to the pressures of patronage by trying to construct a priestly ethos — by suggesting that it is the singular mediator of knowledge, or at least of whatever knowledge has real value, and should therefore enjoy a commensurate authority. If it could get the public to believe this, its power would vastly increase. (more…)

| Peter Klein |

“Nietzsche is peachy,” according to a bumper-sticker I once saw. Nietzsche is sometimes cited in management research as an authority on power, complexity, time, or relativism (e.g., Singer, 1994; Kilduff and Mehra, 1997; Mainemelis, 2001). But what did Nietzsche really say about these things? What are his main contributions to philosophy? Professional philosophers can’t seem to agree, as witnessed in this roundtable conversation with Peter Bergmann, Teodor Münz, Frantisek Novosád, Paul Patton, Richard Rorty, Jan Sokol, and Leslie Paul Thiele. Bergmann calls Nietzsche “the culture hero of modernism, a cultural revolution comparable to the Reformation or the Enlightenment. His critique of herd values is reflected in the posture of the avant-garde: elitist to the present, democratic to the future.” But Nietzsche was no nihilist, says Sokol; he was rather “an excessively sensitive person horrified by a world where nothing has rules and stands for nothing.”

All agree that Nietzsche bears no personal responsibility by the appropriation of his ideas by German nationalists, but Schrift notes that Nietzsche “chose to write in a style that invites misunderstanding — his use of metaphor, dissimulation, and hyperbole in particular, all make it easier for his words to be taken to mean something other than what he might have intended.” A warning to those of us who like jargon and are guilty of bad academic writing. (HT: 3quarks)

| Peter Klein |

Here are two views on the role of economic analysis in public policy, from a passage in Robert Dodge’s biography of Thomas Schelling recounting the early days of Harvard’s Kennedy School of Government:

A tension [among the faculty] began to develop over an ideological difference between two groups. The question that brought about the division concerned the proper role of the policy analyst. Schelling’s view was the same as it had been since the Cold War, and there were other economists in the school who generally agreed. They believed that the approach to policy analysis was to begin by rationally analyzing situations, seeking to understand how things work and what outcomes would be. His idea had been to “solve the puzzle first.” Policy was something that came after understanding. Throughout his career Schelling had fought against the idea of beginning with outcomes, what he saw as looking at problems backward, and had believed that strategic analysis was required in advance to understand situations before developing public policy.

A group headed by Steve Kelman and future Secretary of Labor, Robert Reich, held a different view. This group cared about policy management as well as public policy analysis. Their main argument was that values couldn’t be separated from public policy, and the antiseptic and purely analytical approach of Schelling’s group was incomplete. Policy analysis, the Reich group felt, was to be used in determining a successful path to the goal one hoped to achieve. They believed it was necessary to acknowledge and identify openly what one was trying to achieve or affirm when carrying out a policy. . . . (more…)

| Nicolai Foss |

Nobel Prize winner (2005) Thomas Schelling makes social science come alive. He has contributed fundamental insights to game theory (e.g., the notion of a focal point, the importance of commitment, early insights in the epistemic conditions of Nash equilibrium, signaling, etc.) and to the understanding of social dynamics (e.g., the famous 1971 checkerboard segregation model; early insights in “critical mass” and “tipping”). He is among the founders of game-theoretic conflict theory. 

Schelling has an amazing knack for drawing fundamental lessons from simple illustrations. He rarely uses advanced mathematics, he is more interested in processes than in equilibrium states, and substantial parts of his work is accessible to the educated layman (e.g., this one and this one). He is quite an unusual social scientist.

The latest (Dec.) issue of the ever-interesting Journal of Economic Methodology features a Symposium on Thomas Schelling edited by Abu Rizvi (who, in other journals and volumes, has published some of the most penetrating meta-theoretical work on game theory). (more…)

| Nicolai Foss |

We have blogged occasionally on performativity and related issues here at O&M (e.g., here), though by no means with the frequency of the chaps at our evil twin, orgtheory.net (here is a sample of their 1,206 posts on the subject).

Daniel Beunza (Columbia) and Yuval Millo (LSE) are organizing a workshop 28-29 April on performativity and finance, one of the main areas of applications of the performativity concept. The title of the workshop? Well, “From Bodies to Black-Scholes” (what else?). (more…)

| Peter Klein |

Brad DeLong sounds almost Misesian in this call for economics PhD students to study economic history:

[Mainstream] Economics is the hyper-positivist of social science disciplines: believing that everything of interest can be reduced to law-like theoretical and empirical propositions modeled after classical mechanics; that what cannot be reliably, repeatedly, quantitatively, and empirically demonstrated does not really exist as knowledge; that the only good social science is a deductive, analytical, model-based, general, experimental science.

But this misses a lot. Because we are people like those whom we study, we have psychological access to our subjects’ internal decision-making processes and motivations at a level that we cannot obtain from market price-quantity data. There is lots of interest that happens once and only once. Natural experiments are rare, and so if we restrict ourselves to positivist tools alone much is underidentified. The individuals’ preferences — the “tastes” part of “tastes and technologies” are not primitive but are themselves the result of long and complex historical, sociological, psychological, and — yes — economic processes. You need thickly-described case studies and anecdotes looking out from people’s insides before you can tell if your statistical results mean what you assert they mean.

Mises argues in Theory and History (1957) that the basic economic categories of means and ends, of preference, contraint, and choice, cannot be understood in purely positivist terms: “Being himself a valuing and acting ego, every man knows the meaning of valuing and acting. He is aware that he is not neutral with regard to the various states of his environment, that he prefers certain states to others, and that he consciously tries, provided the conditions for such interference on his part are given, to substitute a state that he likes better for one he likes less.” In other words, we understand economic activity in a causal, realistic sense, a sense denied to us in our study of the natural world. Moreover, like Brad, Mises argued that the historian must use not only the tools of deductive theory, but a deep understanding or Verstehen, to grasp the meaning of particular historical events. (more…)

| Peter Klein |

Social scientists aren’t the only ones reluctant to share raw data. Medical researchers are equally touchy about it, even when granting other people access to the data could lead to real breakthroughs. Biostatistician Andrew Vickers writes in yesterday’s Times about his experiences trying to replicate or extend cancer studies:

Not long ago, I asked a respected cancer researcher if he could send me raw data from a trial he had recently published. He refused. Sharing data would make the study team members “uncomfortable,” he said, as I might use this to “cast doubt” on their results. . . .

[W]e wrote to [another research team] and asked whether they would share their data. They refused on the grounds that they might consider a similar analysis at some point in the future. But years have passed, no such analyses have been forthcoming and few patients are benefiting from what could be a very effective drug. . . .

When a colleague and I wanted to analyze the data from a completed breast cancer trial, merely getting permission to speak to the study’s organizing committee required a one-hour phone call with the scientist in charge of the agenda. Only after another one-hour call with the committee itself were we allowed to submit a formal proposal — to which we received no response. . . .

Researchers give all kinds of reasons for refusing to share — concerns about patient confidentiality, appropriate research methods, and so on — but, Vickers concludes, “the real issue here has more to do with status and career than with any loftier considerations. Scientists don’t want to be scooped by their own data, or have someone else challenge their conclusions with a new analysis.”

Thanks to Research on Innovation blog for the lead.

| Peter Klein |

Gary Lynne sent me John Tomer’s paper from the June 2007 Journal of Socio-Economics, “What is Behavioral Economics?” Tomer summarizes the various strands of behavioral economics and scores each according to “narrowness,” “rigidity,” “intolerance,” “mechanicalness,” “separateness,” and “individualism.” Coverage includes the Carnegie tradition, Katona’s Michigan school, modern experimental economics, Akerlof’s behavioral macro, and more. Tomer defines the field more broadly than I would — he includes evolutionary economics à la Nelson and Winter, for example — but the commentary is insightful.

| Peter Klein |

I missed the ASSA/AEA session “What Should Be the Core of Graduate Economics?” featuring Susan Athey, Ed Gleaser, Bo Honoré, Blake Lebaron, Derek Neal, and Michael Woodford but there is a write-up in the Chronicle (gated, though a free version is temporarily available here). Gleaser offers perhaps the most interesting comment for the O&M crowd:

“We actually shouldn’t be thinking narrowly in terms of first-year economics.” . . . “We should be thinking about first-year social science. The whole division between economics, sociology, and political science feels like a hangover from the 19th century. So many of the people in our profession are working on problems that have traditionally been seen as part of sociology or political science.

“We should probably be rethinking from the ground up all of the social sciences,” Mr. Glaeser continued. “A more attractive model might be a first-year course sequence that trains a social scientist to work on anything, rather than having separate first-year economics, sociology, and political science course work. But maybe that’s a discussion for a different panel.”

My guess is that such a first-year sequence would have two much economics-based sociology, economics-based political science, and the like to satisfy our friends at orgtheory.net. But it is an intriguing possibility. (more…)

| Peter Klein |

Stanley Fish (not one of my favorites) channels G. H. Hardy:

To the question “of what use are the humanities?”, the only honest answer is none whatsoever. And it is an answer that brings honor to its subject. Justification, after all, confers value on an activity from a perspective outside its performance. An activity that cannot be justified is an activity that refuses to regard itself as instrumental to some larger good. The humanities are their own good.

What about the social sciences? Certainly they purport to be”useful,” in a way that the humanities do not. Scholars of business administration hope their research improves business practice. Economists maintain that sound public policy requires the economist’s unique understanding of complex social phenomena. (more…)

| Peter Klein |

Jeremy Freese, trolling the comment threads at our good twin site:

As for sociology, it’s been more a cloud/confederacy than a discipline for more than 30 years anyway, bound together by a determined resolution to ignore the wild number of pairwise combinations of self-described sociologists who have nothing whatsoever in common intellectually except leftward politics.

Now, you can bet that if I’d written that I’d be hearing from the boys over at orgtheory.

| Peter Klein |

We’ve blogged on some of these papers already (1, 2), but it’s worth mentioning that the April 2007 issue of the American Journal of Economics and Sociology includes a symposium called “Reflections and Self-Reflections on the Economics Profession”:

• “Economists’ Opinions of Economists’ Work” by William L. Davis
• “The Input Relationship Between Co-Authors in Economics: A Production Function Approach” by Marshall H. Medoff
• “Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members” by Daniel B. Klein and Charlotta Stern
• “What Do Economists Talk About? A Linguistic Analysis of Published Writing in Economic Journals” by Nils Goldschmidt and Benedikt Szmrecsanyi

Good reading for the narcissistic economist (is there another kind?).

| Peter Klein |

Readers interested in the J-PAL approach to development may enjoy an upcoming conference on “New Techniques in Development Economics,” 19-20 June at Australian National University. “[T]he conference will focus on new methodological approaches to development economics research, particularly field experiments and natural experiments.” Details, courtesy of SSRN, are below the fold. (more…)

| Steve Phelan |

Charlie Munger, the second largest shareholder in Berkshire Hathaway after Warren Buffett (and a member of the Forbes Wealthiest 400) gave a speech at UCSB a few years ago. The full transcript of his speech can be found here. (more…)

| Steve Phelan |

I have used a lot of simulation studies in past papers and I currently sit on the editorial board of the Journal of Computational and Mathematical Organization Theory (CMOT). However, I was surprised to stumble upon an emerging field in economics called “metanomics.” (more…)

| Steve Phelan |

Peter, thank you for the warm introduction. In addition to 15 years in academia, I also had another life working in strategic planning in major corporations in Australia and undertaking the odd strategy consulting gig. I’ve also had the pleasure of teaching executive courses on four continents.

In all this time, the most common critique I encounter is the lack of relevance of academic courses to the “real world”.  I am sure that many readers will agree that the 1980s and 1990s were an exciting time to be a strategy practitioner or researcher. The work of Porter and Barney (among many others) brought a level of rigor to the discipline that promised to revolutionize the practice of strategy.
(more…)

| Peter Klein |

From Joshua Gans I learn that Research Policy has officially retracted a 1993 article by Hans Werner Gottinger which copies substantial passages from a 1980 article published in the Journal of Business. A lengthy editorial in the September 2007 issue of Research Policy explains the case. Apparently Gottinger is a serial plagiarist who has regularly copied material from previously published papers, without acknowledgement, and has falsified his CV by listing positions and affiliations with universities and institutes that never existed or never employed him. This article in Nature provides details (the Research Policy editorial will be gated for some readers).

The entire incident is very sad, and suggests that academic dishonesty may be much more common than is usually thought. One low-cost suggestion for improvement: publishers should check key words and phrases from every paper — or even the entire text — against the archives from Google Scholar, JSTOR, Google Books, and other full-text databases of academic publications. That won’t catch everything, but will likely catch at least some cases. Surely the Google cache has made life harder for plagiarists. (Students, beware!)

| Peter Klein |

I learned about Qualitative Comparative Analysis (QCA) from Peer Fiss at last month’s Sundance conference on comparative organizations. QCA is a kind of cluster analysis that is said by its proponents to be superior to linear regression for identifying causal relationships among variables in small samples. Kogut, MacDuffie, and Ragin (2004) and Fiss (2007) apply QCA to organizational problems. If you’re interested in learning more you might drop by the EGOS Colloquium in Amsterdam next July for a special session on QCA and similar methods, “Comparing Organizations: New Approaches to Using Case Study, Small-N, and Set-Theoretical Methods.”

NB: I was reminded of the Sundance conference, and the relations between economists and sociologists, when I had dinner with a prominent labor economist at last weekend’s Kauffman symposium on entrepreneurship data. He said he was tired of labor economics meetings — “all anyone talks about is identification, identification, identification” — and was thinking about attending the Academy of Management conference to broaden his perspective. I responded that after a few days at the AoM he might be dying for someone to mention identification!

| Peter Klein |

I head to Kansas City today for the Kauffman symposium on entrepreneurship and innovation data, where Mike Sykuta and I will give a presentation on the CORI contracts library. Descriptions of all the data sets to be presented are available at SSRN.

I’m curious to see how the participants will address the issues of measurement and definition that are particularly thorny in entrepreneurship research.

| 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: (more…)