Executive Interviews: Interview with Paul JH Schoemaker on Business Schools and Business Ethics
July 2010 - By Vandana Jaykumar

Paul JH Schoemaker
Research Director, Mack Center for Technological Innovation, The Wharton Business School, University of Pennsylvania

• It is generally said that theprofession of business has yet todevelop a unifying professionalidentity like that of professions suchas law, medicine, engineering, orarchitecture. What is your opinion onthis?
  Traditionally, business schools havefocused on analytical models andreductionism. However thesetraditional business models haveproved to be inefficient in handlingthe uncertain business situations thatmany industries face today. Businesseducators have always faced thedilemma of academic rigor pittedagainst practical relevance(notwithstanding Kurt Lewin’s astuteobservation that nothing is aspractical as good theory). Thedilemma stems from two seeminglyconflicting notions. On one hand,universities must hold true to thetime-honored tradition of scholarshipand the associated principles ofscientific inquiry. On the other hand,whatever universities teach andexplore within their professionalschools must be relevant to theclinical art that defines the professionat that time. I agree that business as aprofession has yet to develop aunifying professional identity or astandard for professional certification(which the MBA presently is not).

• In recent times, MBAs have been accused of destroying value. Is this criticism justified or is it a misplaced one? Have business schools become mere ‘trade’ schools?
  While it could be argued that the explosive growth of MBA programs over the past several decades constitutes strong evidence that the current business school model is actually working very well, how much credit MBA training deserves—relative to the US being a magnet for global talent, the existence of top flight venture capital markets, technological innovations by engineers and scientists, or a social and legal climate conducive to business—is hard to untangle. For example, there was great innovation in the US prior to the ascent of the MBA degree, and many of today’s entrepreneurs obtained other types of degrees or dropped out of college altogether. MBA critics will emphasize that business schools have lost much market share to corporate universities, experience stiff competition from other non-academic sources, helped indirectly fuel greed and corporate scandals, and saturated the market with “me to” business degrees. They might also point to the declining US dominance in business research and teaching globally as evidence that the traditional U.S. business school model is past its prime and in need of renewal.

• How has the field of business research evolved? Has it improved or deteriorated with time?
  In the early fifties, business education was more akin to vocational training than to science. Some schools of commerce featured courses on basic bookkeeping or best banking practices in their core curriculum. The Carnegie Foundation and the Ford Foundation criticized these courses for their lack of rigor and scholarly merit. Moving beyond just critique, these powerful foundations offered competitive grants to reinvent business education and imbue it with greater rigor and scholarly depth. Four centers of excellence were eventually funded (at Carnegie-Mellon, Harvard, MIT, and the University of Chicago), with economics identified as a common core academic discipline. Ever since, the field has beefed up its academic standing by promoting faculty with deep scientific roots. Over time, however, these scholars often took business research in directions no longer comprehensible or relevant to business students and managers. As the field moved toward more analytical approaches, borrowing from the physical sciences as well as statistics and computer science, academic respectability increased while practical relevance often took a back seat.

• Has the excessive use of mathematical tools in business research shifted the focus away from real-time business situations?
  The mathematical models underlying the leading researches generally tend to focus more on well-defined problems rather than the uncertainties of the real world. Heavily influenced by the academic discipline of economics, which often suffered from physics envy, business scholars were preoccupied with equilibrium solutions and optimality theorems in which analytic elegance could truly shine. Business research focused on static economic models while paying insufficient attention to the dynamic nature of business, the crucial role of knowledge, the internal structure of the firm, the seminal role of entrepreneurship, and a focus on stylized markets rather than social networks.

• Has the time come for business schools to revitalize their approach towards business education and research? How can they stay relevant amidst changing business conditions?
  The world of business has become more dynamic, uncertain, and multicultural. Amidst the technological innovations, globalization, geopolitical turmoil, concerns about climate change, and ideological schisms, the notion of equilibrium seems a quaint artifact from a simpler time. The changes in the business environment that started in the 1960s, coupled with some striking features of the new global knowledge-based economy, compels us to rethink our approach to business education and research, as well as perhaps the very nature of the universities and the role of professional schools therein. Universities no longer have a monopoly on higher learning. When Google declares its mission as “organizing the world’s knowledge,” as corporate “universities” spring up, when consulting firms become think tanks in their own right, and the Internet permits remote learning, it certainly points to a new era. Business schools may become just one of many knowledge hubs. Expressing their comparative advantage amidst changing business challenges will help the business schools to stay relevant

• It has been seen that even established firms find it hard to cope up with profound changes in business conditions. Can this be attributed to outdated business models? Does it point to a deficiency in business education?
  New entrants into various industries have used technology in desktop copiers, electronic calculators, mini-mill steel making, videotape recorders, and hydraulic earth-moving equipment to take market leadership away from incumbent firms. The computer industry has evolved from competition among vertically integrated stacks to a horizontal industry model where competition occurs between component providers. A similar story has unfolded in the hard disk drive industry where market leadership changed with each successive product generation. Similar stories are currently playing out in the world’s media, information technology (e.g., search engines), and pharmaceuticals, since leading incumbents often operate from outdated business models. To what extent these industry dynamics reflect deficiency in business education is a complex question. Clearly, the leaders of the large companies that lost market share often possessed MBA degrees. However, so did the leaders of the startup companies that caused the disruptive innovation, although there were some notable college dropouts there (e.g., the founders of Microsoft and Oracle) as well as students from other walks of life (e.g., Google).