Entrepreneurship and Business Education

23 June 2006 at 1:07 am 9 comments

| Peter Klein |

Kauffman Foundation president Carl Schramm joins a rising chorus of protest against contemporary business education with an op-ed, "The Broken MBA," in the Chronicle of Higher Education. US business schools, says Schramm, have missed the transition from "bureaucratic capitalism" to "entrepreneurial capitalism."

Although most major schools now have formal programs in entrepreneurship, the programs typically exist in isolation. Their precepts have had little impact on the core curriculum. It is hard to find serious research on entrepreneurial processes, and not much attention is paid to the importance of technology in entrepreneurial growth — even in large companies.

Instead, business schools have chosen to emphasize ethics and social responsibility, a move Schramm blasts as "ineffective, irrelevant, or even counterproductive." On ethics: "Presumably the goal is to prevent future Enron-like scandals, but how likely is it that human behavior can be changed for the better by tacking on a course on ethics?" On social responsibility, which he calls a "nebulous area": "The implicit message of those courses is often that business goals should be subordinate to political goals. Business serves society by creating wealth — that is its true social responsibility. Business schools do their students and society a disservice by teaching that corporations should pledge primary allegiance to political ends, which could harm their ability to create the wealth upon which civil society depends."

Schramm's suggestions for improvement: (1) Pay more attention to business theory. (2) Emphasize the role of technology. (3) Teach risk taking more effectively. (3) Make professors do empirical research with practical implications. (4) Emphasize general principles rather than cases. (5) Cut out the fluff and focus on the core. Not an unreasonable set of suggestions, on the whole.

Addendum: Another article in the same issue of the Chronicle asks — as we've discussed here, here, and here — if economics (agency theory, in particular) is responsible for Enron. Rakesh Khurana, Herbert Gintis, and Lynn Stout, while not exactly saying Yes, seem sympathetic to the idea. Michael Jensen, not surprisingly, demurs.

Entry filed under: - Klein -, Entrepreneurship, Teaching.

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9 Comments Add your own

  • 1. Bob V  |  23 June 2006 at 7:10 am

    I taught my first-ever dose of ethics and social responsibility in a class on purchasing this year. I have to agree with Schramm that there are a number of issues with it (though It is possible that I just don’t know how to teach the stuff yet.)

    I believe the teaching of ethics is counterproductive. Students learn about different perspectives about a problem. For example, a principled view might suggest the firm take a certain action, and the utilitarian view might suggest another. The end result seems to be that the businessman can do whatever he wants and have some sort of post-hoc justification for it. I don’t suggest that students not learn about these perspectives, but I think we need to provide some guidelines on how to ultimately choose the right one. (Note: I have no idea how to do this.)

    Out the other side of my mouth, I found myself talking about social responsibility. The students and I generally see businesses who act in the interest of their shareholders, employees, and customers as good. We generally believe that the business’s capacity for good actually decreases when the classic issues of social responsibility come to dominate a firm’s actions. Thus, I feel dirty talking about social responsibility immediately after talking about ethics. I think my students sense the contradiction as well.

  • 2. Jüri Saar  |  23 June 2006 at 8:40 am

    In some of the more provincial areas of the world (i.e. Estonia) one of the oldest business school has gone down the exact same route: ethics and social responsibility with not enough etrepreneurship.

    Since most Estonians who work in business received their education during the Soviet years a lot of them decided to get a second degree from a business school. However, having had contact with the realities of doing business most of them were rather amused by ethics courses with almost none of them taking it seriously.

    I also don’t see business ethics as something apart or different from ethics in general.

  • […] Via Organizations and Markets, the Chronicle has an article about the business of business education. Should business professors teach their students (particularly MBAs) to pay attention to ethical and moral issues, instead of just focusing on shareholder value maximization? Many business profs contend that ethics is not their domain of study. Leave that to the philosophers. Others, however, argue that by only teaching MBA students how to make a profit, business schools fail to establish an accepted ethic that you see in other professions. Lynn A. Stout, a professor of law at the University of California at Los Angeles and an expert on corporate governance, also is using behavior to challenge the shareholder-primacy approach emphasized at business schools. She argues that businesses lose public trust and damage employee morale when they base decisions solely on how they will affect shareholders' profits. Companies are more likely to succeed, she argues, if they follow a "team production" approach in which the interests of shareholders are balanced with those of other parties, including employees and customers. "The tough part is getting business-school professors to focus on it," she says. "We're asking them to move on from a simple 'earth is flat' theory of the corporation that's so easy to describe and apply. There's more to the corporation than the simple problem of getting the directors to do what the shareholders want them to do." […]

  • 4. hervé legenvre  |  23 June 2006 at 1:15 pm

    looking at CSR, we need to re-ancher it to the true business challenge:
    How the perception of society and stakeholders in general impacts on customer behavior
    How the perception of society and stakeholders impact on employee behaviour
    How the interaction with society and stakeholders could be a source of innovative ideas
    How by using its core competencies for a a specific cause an organisation can learn
    the rest is more or less lot’s of bla bla and somehow diconnected

  • 5. hervé legenvre  |  23 June 2006 at 1:23 pm

    Suggestion for improvement look good to me.
    One key point for me is to engage people in inventive activities. Entrepreneurship is not just about business plan or creativity techniques.
    It is also about inventing, experimenting, convincing others, connecting ideas together, leading project under uncertainty. Learning by doing is key here…
    I believe that many students develop their skills through their social and asociation activities not directly from the classroom

  • 6. Peter Klein  |  23 June 2006 at 1:28 pm

    Regarding ethics and CSR, we know that B-school administrators tend to be slaves to fashion (“Leadership,” anyone?). These may be fads as well. (My colleague Harvey James has on his office door a WSJ cartoon featuring two well-dressed executives at a bar, one saying: “This ethics bubble will eventually burst.”)

  • 7. C. Grammich  |  26 June 2006 at 9:58 pm

    Earlier this year Fortune Magazine published a list of the top ten schools for entrepreneurs (http://money.cnn.com/magazines/fsb/fsb_archive/2006/03/01/8370304/index.htm?cnn=yes). I don’t put much stock in such rankings, and really don’t know much about this field except for how it overlaps in some small ways my current professional interests, but I was intrigued by how this list differed from the US News list of the top (overall?) graduate schools of business (http://www.usnews.com/usnews/edu/grad/rankings/mba/brief/mbarank_brief.php). The only schools I saw that were common to both lists were Harvard (#1 on the USN list), Texas (tied for #18), Rochester (tied for #23), and Arizona (tied for #40).

    I’d be curious what, if anything, anybody (which means everybody?) more knowledgeable about these things think this says about entrepreneurialism of the schools themselves. As I recall (accurately?), DePaul (where my father received his MBA after years of part-time night school), one of the most “entrepreneurial” schools on the Fortune list, has always been an innovator in this “market,” being the first graduate school of business to offer night classes as well as the first to offer degree programs for part-time students.

  • 8. Harvey James  |  29 June 2006 at 3:20 pm

    Interesting thread. It’s an old problem B-schools face with respect to the question of ethics and CSR. Does teaching it do any good, and, regardless, should it be taught? The reality is that there is not a lot of evidence that teaching ethics will “change” people, or at least prevent Enron-type problems we’ve seen in the past. On the other hand, Schramm’s suggestions will not prevent the Enrons either. Teaching opens people’s eyes, which is why teaching ethics and CSR is valuable. Economic incentives change people’s behavior, which is how Enron problems will be prevented or created.

  • 9. A Free Spirit  |  11 October 2009 at 3:58 pm

    What about when bus ethics is taught unethically? I’ve just blogged on a case in point: http://deligentia.wordpress.com/2009/10/06/politicizing-academics-business-ethics-compromised-in-the-classroom/

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