Cost Of An Academic Article: $400K

by John A. Byrne on

professor faculty

For years, critics have bemoaned the waste and inefficiency of much of the scholarly research done by business school academics. Now they will have a piece of shocking data that will no doubt resurrect the long-simmering debate.

In a study released today (July 16), two academics from the University of Pennsylvania’s Wharton School of Business estimate that the cost of a single scholarly article written by B-school professors is an astounding $400,000.

“It is shockingly expensive,” concludes Karl Ulrich, the vice dean of innovation at Wharton. “I am a scholar. I do research and am supportive of it. But I had never carefully looked at how much it costs. It’s fantastically expensive. Can we really afford it? And can we compete without it?”

THE ESTIMATE COMES FROM A TEAR DOWN OF THE BUSINESS MODEL OF AN ELITE MBA PROGRAM

Though the estimate is a subordinate point in a report on how technology will impact the elite business schools, it is likely to call into question such large investments at a time when universities are under increasing pressure to lower their costs. The $400,000 number is in a tear down of the business model for elite MBA programs done by Ulrich and Wharton colleague Christian Terwiesch, a professor of operations and information management. It’s an exorbitant number, especially considering that many faculty articles are read only by a limited number of scholars in a discipline and often have little to no value to practicing mangers and leaders.

The finding came about by accident, a result of the authors’ efforts to get at the underlying costs of running an elite business school and how those costs would be impacted by technology. “It cost Wharton $250,000 on our entire MOOC (Massively Open Online Course) activity last year which gets you to about page 12 on a single article,” observes Ulrich. “We better figure out how to articulate the value proposition. It is really important to explicitly fund scholarship and say why it is important.”

Ulrich attributes some of the pressure on schools to do research to rankings which attempt to measure published output by professors. “There is a significant element of that expense being the pursuit of ratings,” he says. “Ratings are really important, especially to the second tier business schools. They look at the BusinessWeek rankings and use those in their tenure promotion analysis. We raise the question is this an artifact or is this, in fact, a casual connection between faculty scholarship and the quality of an education.”

      The Cost of Creating An ‘A’ Journal Article

Source:

Source: Will Video Kill The Classroom Star?

FOCUS ON RESEARCH A RESULT OF A RETHINKING OF BUSINESS SCHOOLS IN THE LATE 1950s

The heavy emphasis on research at many business schools came about in the late 1950s when business education was attacked as having little academic legitimacy. A Ford Foundation report by two economists, Robert Aaron Gordon and James Edwin Howell, tore into business schools for having narrow, trade-focused curricula, employing poorly trained faculty, and using simplistic teaching and research methodologies. The Gordon-Howell report encouraged university officials to invest far more heavily in scholarly research, particularly theory and rigorous analysis. Many schools rushed to embrace that approach, in part to prove they were equal to their university colleagues. Today it is virtually impossible for a professor to gain tenure without being published in several academic journals in his or her discipline.

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  • http://www.jwmi.com/ Daniel Szpiro

    I believe this is a conservative estimate. It’s likely that the “full cost” for business schools for each article published by its faculty in a top-tier academic journal is probably closer to $2M – $3M.

    Let’s use two Ivy League business schools as examples: Harvard and Cornell. These are convenient samples because each school publishes financial statements that can be used for this analysis but it isn’t hard to assume that the results are generalizable.

    For both HBS and Johnson, operating expenses for the academic year ending in 2013 can be broken down approximately as follows: salaries and employee benefits = 50%; student financial aid = 10%; other operating expenses = 40%. If we set aside the portion of the budget used for student financial aid then that leaves 90% of operating expenses supporting the two activities that form the core of the mission of business schools: research and teaching. Let’s use the 50/50 split suggested by the authors in their analysis with regard to the resources devoted to each activity. This leaves us observing that 45% of the operating expenses of these business schools are devoted to research. In the case of HBS that came to $244M and the case of Johnson that was $35M. Okay – we’ve got the numerators in calculating our cost per article.

    To get the denominators let’s go back to the authors’ original calculations. They estimate that the typical article is co-authored and the typical rate of publication is 0.75 times per year. Accordingly to HBS, it had approximately 220 research-active faculty members during this period. That would lead to (220 / 2 * 0.75 =) 82 top-tier papers. At Johnson, the approximately 60 full-time research-active faculty members should have produced (60 / 2 * 0.75 =) 22 top-tier papers.

    Okay – let’s do the math. The full cost per top-tier article at HBS comes to ($244M / 82 =) $3M and the full cost at Johnson comes to ($35M / 22 =) $1.75M

    While this is very much a back-of-the-envelope approach, I think it highlights that the cost of top-tiered academic articles is much higher than the authors’ suggestion. One might argue that while 50% of faculty time is allocated to research, perhaps more that 50% of the other operating costs and staff salaries are actually allocated to the teaching activities of the school. That may be true, but it doesn’t matter: the schools wouldn’t exist without students so the 50/50 split of allocating costs between research and teaching is an accurate reflection of the mission of the schools and how bound together these two components really are.

  • David Lantz

    There’s certainly great value to be had in assessing the costs and return-on-investment of scholarly research at business schools, but I’m curious if this simple calculation based on an informal survey of faculty vitae accomplishes that. Wouldn’t the time allocated to research support more than the writing of an A-journal article? Faculty typically apply for and win grants to support their research, and they then work with students to coordinate and complete that research.

    How much of the cost of a typical business school A-journal article is supported by grants? What are the educational and scholarship benefits of the research experience provided to students – not only in dollars, but in learning opportunities? The quality and impact of the resulting scholarship aside, research activities generate a range of returns for a school or department. You can’t really reduce this ROI calculation to a single paper, can you?

    There’s an old Oscar Wilde saying about knowing the price of everything but the value of nothing. In this case I don’t think we really know either – although the $400K price tag does make for a very catchy headline: “You won’t believe the shocking cost of a single academic article!” And I have to admit that I don’t.

  • cardinalis

    This comment, as well as the original article, epitomizes “garbage in, garbage out” thinking. The “back-of-the-envelope” calculations conveniently ignore that a much higher % of operating expenses go into teaching and teaching facilities than into research, that not all coauthors are other faculty, that most faculty do administrative service in addition to research
    and teaching (and many advise students “on the side,” since this usually doesn’t count toward teaching obligations), that knowledge doesn’t only accumulate in “A” list
    journals, and that the “no one cites academic articles” meme isn’t actually supported by citation data. But, who cares if the calculations are reasonable, as long as they make universities look bad…

  • http://www.jwmi.com/ Daniel Szpiro

    Not really sure where you’re going with these comments. Is it (a) back-of-the-envelope measurements can be improved or (b) we shouldn’t even bother measuring the cost of business school research? The former is a truism – you can always claim that measurement can be refined – so uninteresting. The latter is a cop out: if you believe something is important then you should be able to define why and measure how.

  • Devinney

    I did the same analysis for my own school (which at that time was the Australian Graduate School of Management — which no longer exists) about 10 years ago and the number we came up with was on the order of about $110,000. Interestingly, I contacted several other schools (including the then Associate Dean at Wharton) and came up with comparable figures. At that time, their number — using my method — was closer to $140,000. In the end, it depends on what you consider to be an “A” publication and what you consider in the cost base of the faculty. For example, the $300,000 figure above is very low as that was close to what I used 10 years ago. Today, the comparable figure is larger. Second, the 50% allocation for research time is either too low or too high depending. How many faculty are actually doing research and who is covered in the allocation will deflate or inflate the figure. So, the number will vary very wildly depending on what analysis you use (as noted by Daniel Szpiro below).

    But overall, the question is really not the right one. For example, what is the benefit of one of those publications? In analysis that we did on the FT rankings we found that basically only two things mattered to movement in the rankings — starting salary/salary growth and research output. If you had a sustained 10% lower research productivity this could have reasonably significant impact on your standing, particularly if you were a ‘mid-level’ school. For most schools this would amount to a difference in per year article output falling from around 0.5 articles per year to 0.45 articles. Do you honestly think that any school would want to risk its positioning for $5k-$10k per faculty member per year? I seriously doubt it.

  • JohnAByrne

    Dan,

    Thanks very much for weighing in with such thoughtful and intelligent commentary. I was taken aback by the $400K number. I am absolutely floored by your estimate. One point Karl Ulrich made to me was that no one really looks at or tracks these costs because they are “hidden” in the operating expenses of a school. Having a discussion about them is a healthy way to determine whether this money is well spent or efficiently spent after many years of tuition increases above the rate of inflation.

  • Roger Martin

    A couple of years ago, I did an article for AMLE that came to a similar conclusion about the cost of an A-journal article – mine was $500K, so quite close to this estimate.

    Re Daniel’s point below, my article was an invited commentary on an article on the actionability of business school research and that article argued that only about 30% of research in the A-journals studied was even minimally actionable.

    If that is true, then the cost of an article in an A-journal that can actually be utilized in some way by businesspeople is about $1.7 million – not far off Daniel’s estimate below.

    My article can be found at: http://www.thinkers50.com/downloads/The-Price-of-Actionability-Roger-Martin.pdf

    Cheers

    Roger

  • http://www.jwmi.com/ Daniel Szpiro

    Hi John,

    Thanks for your feedback – always a pleasure to read and contribute to threads on P&Q!

    I agree with Karl’s observation about research activities being “hidden” in the budget of business schools. I had the opportunity to chair the Senate Budget Review Committee at Queen’s University in Canada for a few years. I can say from personal experience / observation that this budgeting shortcoming is also generalizable outside of business schools.

    The standard budgeting process is typically to allocate 100% of faculty salaries and other operating expenses (e.g., facilities overhead, most staff salaries) to programs (e.g., MBA, EMBA, PhD, etc…). The only items classified as research-related are typically directs costs (e.g., databases, research assistants). This budgeting treatment was the case while I was an administrator at the business schools at both Queen’s University in Canada and Cornell. Putting on my hat as an accounting professor, I pointed out to the business managers at both schools that the budgeting systems could answer what is the full cost of research – rather ironic given that the mission of both schools included the creation of new knowledge. In both conversations, years apart, each replied that no one ever asked that question!

    Students’ tuition fees are used to fund all of the operations of a business school, and that includes research. I believe that business schools should be more comprehensive and transparent regarding disclosure about their research activities, the resources devoted to these activities, and the results. The students asked to fund these activities deserve to know.

  • http://www.jwmi.com/ Daniel Szpiro

    David, your thoughtful comments are pushing this thread beyond what its title describes. This discussion is about the cost of producing top-tiered articles, not the results of business school research or the ROI. Of course, ROI is a more interesting question but it isn’t a bad idea to start with measuring the investment portion of that ratio.

  • http://www.jwmi.com/ Daniel Szpiro

    Hi Roger,

    Thanks for posting the link to your AMLE article. Reading how you came to the $500K figure, I see that the main difference between your calculations and what I included in my post was indirect costs (i.e., overheads). As you wrote, you focused on the direct costs alone – faculty salaries.

    There’s no one “right” way to calculate the cost of anything, just different calculations that are either better or worse at answering a specific question about cost. In my approach I looked at estimating the “full” cost of each article: the sum of the direct and indirect costs incurred to support the research activity of the school divided by the number of top-tiered publications. I believe that using a full cost approach is useful as indirect costs are real, significant, and undeniably supply resources that are consumed to support the research activities of a business school. Leaving indirect costs out makes the calculation more straightforward, but including some estimate of indirect costs supporting research makes the calculation more comprehensive.

    Thanks,
    Danny

  • Roger Martin

    Couldn’t agree more, Danny. Mine was a very conservative estimate. As you can tell from my article, the core of my argument wasn’t about the costliness of research but about the schism between it and actionability. So I didn’t go the full distance on overhead costs. But you are right. They are a core part of the cost of research – and that is affirmed, of course, by the government granting agencies who add an overhead portion to research funding – more in the US than Canada I might add.

    So I in no way dispute your estimate – rather, I would argue that the answer sits somewhere between the $400K in the article and your $2-3 million range.

    If the positive impact on the world is high, that is probably a drop in the bucket. If it is not, then that is a heck of a lot of dollars being spent.

    Cheers

    Roger

  • Chuck Morrissey

    I have a $400,000 article for sale. How should I price it?

  • Jane Robbins

    On the contextual point made in this report about the origin of the focus on research: It was likely the simultaneously published Pierson study, not the Gordon and Howell, that won the mid-20th century battle in the competitive argument over teaching vs research, which really was a conflict over an external business vs internal business school orientation. While G&H talked about research, their overall argument was for a more behavioral education to meet business needs, including: “…ability to work with people, ability to get things done,
    intelligence, initiative, leadership and administrative ability, capacity for
    hard work, judgment, adaptability, dependability, loyalty, and vision and
    imagination…a well developed sense of social responsibility.” (Sound familiar?) This is what they argued should be the focus of business education. Pierson acknowledged this is what businesses reported they wanted, but argued such things “can hardly be taught,” and that business schools should focus on a more scientific approach to business, and teaching tools of analysis. The differing weight placed on research in the two perspectives had quite different implications for faculty.

  • http://anatdiv.wordpress.com/ Steve Phelan

    David, in my experience, grants are not a big part of b-school income. The tuition from graduate and executive programs tends to subsidize the research.

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