Stories and Articles
Corporate Strategy May Depend on When
the CEO Earned Their MBA
San Diego State University researcher finds a correlation between when a CEO earned an MBA and the marked decline in diversifying acquisitions
Proctor & Gamble was the parent company for Pringles potato chips.
PepsiCo owned Taco Bell.
But no more. In fact, corporate diversification has shown a marked decline in recent years and a CEO’s business education may hint at why this is happening.
Research by SDSU management professor Taekjin Shin and co-author, Jiwook Jung at the University of Illinois at Urbana-Champaign, indicated a direct correlation between when a CEO earned their MBA degree and corporate strategy trends - specifically, the marked decline in corporate diversification.
The professors studied data from 640 companies compiled between 1985 and 2015. They found that when those corporations were headed by CEOs who earned their MBA during the 1970’s and 80’s, corporate diversification decreased sharply.
The researchers were found that de-diversification trend correlated directly with the general ideology of business school faculty who viewed diversification as undermining shareholder value starting in the early 1970s through the 1980s.
The research, entitled “Learning Not to Diversify: The Transformation of Graduate Business Education and the Decline of Diversifying Acquisitions” has been accepted for publication and is currently available online in Administrative Science Quarterly.
Dozens of companies have de-diversified their holdings in the past 20 years including Proctor & Gamble (who also shed Jif peanut butter, Covergirl cosmetics and many other product lines without replacing them) and PepsiCo (who owns no other restaurants after spinning off those holdings into YUM! Brands).
“Our study verifies the significant impact business schools have on corporate management, albeit with a long time lag,” said Shin. “We were able to demonstrate how a CEO’s education creates a ripple effect that impacts shareholders, corporate strategy and major economic trends over the long term.”