FT Ranks Top 25 In Entrepreneurship

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For the second year in a row, Stanford University’s Graduate School of Business tops a relatively new ranking of the business schools that are best for MBA entrepreneurs. U.S. schools dominate the global list, taking 15 of the 25 ranks, while seven U.S. schools sit atop the ranking published today (June 26).

Yet, even among the top seven, there is surely to be some dispute. Babson College’s Olin Graduate School of Business, long known as a pioneer in the field of entrepreneurship, was ranked second. The University of Virginia’s Darden School and Dartmouth College’s Tuck School surprisingly came in third and fourth, respectively. No. 5 UCLA, No. 6 Berkeley and No 7 Wharton were next, before the first non-U.S. school on the list, IE Business School in Spain.

Overall, the FT list undervalues the entrepreneurship initiatives at some business schools, including Harvard Business School and MIT Sloan. Even worse, it completely ignores many schools, including Northwestern’s Kellogg School, Michigan’s Ross, and Indiana University’s Kelley School of Business, which frankly boast more robust programs in entrepreneurship than several of the schools that made the list.

MANY EXCELLENT BUSINESS SCHOOLS FAIL TO MAKE THE FT LIST

In fact, it may very well be possible to compose a ranking of schools that are missing in action here that are among the world’s best in teaching entrepreneurship to MBAs. That list would include Carnegie Mellon in the field or robotics, Vanderbilt in healthcare, the University of Washington in software, Texas and Rice in energy and life sciences, and Washington University in all things tech. It’s possible they were excluded because the sample of alumni respondents was too thin: To be ranked, at least 15 alumni entrepreneurs at a school had to respond to the survey.

Like most rankings, this one also suffers from credibility-destroying volatility. This is only the second year the Financial Times has cobbled together a ranking of entrepreneurship at the world’s top business schools. The first list only ranked ten schools, but four of them, including the previously No. 3 University of San Diego, failed to make this second list. MIT Sloan, ranked second behind only Stanford last year, placed 11th this year. Babson, which was ranked eighth last year, shot up to second place now. Harvard, fifth in 2015, now finds itself 13th.

Still, the Financial Times draws on some fascinating data to compose its ranking. The editors take answers to several questions on their annual survey of MBA alumni to crank out this assessment of B-school entrepreneurship. In the mix of metrics are the percentage of grads who actually started a company within three years of graduation, the percentage who raised all or part of their equity from investors, the percentage of companies started in 2013 or earlier that are still operating at the end of 2014.

The most eye-opening finding has little to do with the ranking: It is the explosion in MBA entrepreneurship just after graduation. While only 5% of graduating MBAs do startups, the FT found that an average of 19% of MBA alumni have become founders within three years of graduation (see How MBA Employment Reports Understate The Startup Mania). That finding certainly justifies all the attention business schools are paying to entrepreneurship these days, with new courses, more faculty, and business plan competitions.

AN IMPROVEMENT FROM OTHER ENTREPRENEURIAL RANKINGS

The ranking also factors in the opinions of alumni on both the school and the alumni network, including the extent to which a school and the network helped the founders start the company and secure funding for it. The FT also attempts to measure alumni sentiment on whether the skills gained during the MBA encouraged the entrepreneurs to start their companies. These are all solid measurements, even if the results appear problematic and flawed.

That’s why the expanded FT list represents an improvement over all existing efforts to rank schools on this subject. With its purposely vague methodology, the annual ranking by Entrepreneur magazine has long been a running joke among business school deans and entrepreneurship directors. The U.S. only U.S. News ranking–based solely on the opinions of deans and MBA directors–is more of a popularity contest than an intellectually honest effort to measure the quality of these programs. Even Poets&Quants‘ ranking–based on the number of MBA startups a school has put on an annual list of the top 100 startups gaining the most funding–is highly limiting in nature because it doesn’t take into account the amount of bootstrapping by MBA founders.

Still, the drawback to the ranking is that it relies solely on alumni input from a survey designed for another purpose entirely–the newspaper’s global MBA ranking published in January of this year. The small sample size not merely leaves out obvious world-class players in entrepreneurship. It also leads to conclusions that are hardly statistically valid. The difference between the average score of the top 25 schools and all the other unnamed schools in the sample on any question, for example. are so close as to be meaningless. At the 25 ranked institutions, the average score was 8.2 on whether the alumni network was helpful to an MBA founder in starting a business. At all the other schools it was 7.8, a difference that would be even less if the best schools were included in the overall average. That’s not much of a gap at all.

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