How The MBA Changed CEO Decision Making

B-Schools Influence Decision Making More Than You Think

Business school may be influencing how students make decisions later on.

New research published by the Harvard Business Review explores whether or not a B-school education truly has the power to shape students’ minds and decisions once they reach positions of power at major corporations and financial institutions.

“The overarching goal of most business schools is to train future leaders to lead,” authors Jiwook Jung and Taekjin Shin write. “But how well schools meet this goal, and to what extent their teaching influences their students’ leadership, is an open question.”

Methodology

To explore this questions, Jung and Shin collected data from 2,031 CEOs who ran 640 large U.S. corporations from 1985 to 2015. Additionally, Jung and Shin took note of their educational backgrounds, such as which b-school they attended and when they graduated.

Here’s a breakdown of their sample:

  • 20% of CEOs in the 1980s had an MBA, and throughout the 1980s and the 1990s the percentage steadily increased to 33%, where it remained during the 2000s
  • Sample split into three cohorts — CEOs who earned an MBA before 1970, those who matriculated in the 1970s, and those who did so after 1980

Through the three cohorts, Jung and Shin examined whether or not the groups made different decisions regarding corporate diversification.

According to Chron, diversification means “branching out into new business opportunities, not just expanding your existing business.”

Earlier MBAs More Likely To Pursue Diversification

In their study, Jung and Shin found that CEOs who earned their MBA before the 1970s were 17% more likely to pursue diversification during their tenure.

Those who earned their MBA in the 1970s were 24% less likely to pursue diversification. Those who earned an MBA after the 1970s were 30% less likely.

So, what does this mean? Well, for one, Jung and Shin argue that their findings are pertinent to those teaching b-schools students.

“Although some academics deplore how little influence management theory has on business practices and society, our study demonstrates that it does seem to have an impact in the long run,” Jung and Shin write.

If anything, Jung and Shin argue that their study offers a warning to b-schools worldwide.

“As more students, scholars, leaders, and pundits are now reflecting on the influence of business schools, it is precisely the time when business educators should realize their responsibility and potential,” Jung and Shin write. “What they teach matters, and their impact on society becomes clear only after many years.”

Sources: Harvard Business Review, Chron