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James Walsh
  James Walsh
 

Research Reflects Changing Views about the Purpose of Businesses

10/3/2003 --

ANN ARBOR, Mich.---Management scholarship today rarely considers the effect of organizational practices on social life outside the boundaries of the firm. As a result, we see an overemphasis on economic performance and the neglect of how business activity affects human welfare, says James P. Walsh of the University of Michigan Business School.

"This research imbalance fails to reflect the Academy of Management's dual founding ambition to help meet society's social and economic objectives, and by doing so, to serve the public interest," says Walsh, the Gerald and Esther Carey Professor of Organizational Behavior and Corporate Strategy. "The public interest and social objectives that were to stand alongside economic objectives in orienting the work of management scholars seem to have been misplaced. While the attention paid to economic performance is vital to any conception of organization studies, it bears a potential threat to our scholarship when it eclipses its companion focus on social objectives."

In "Social Issues and Management: Our Lost Cause Found," forthcoming in the Journal of Management, Walsh and colleagues Klaus Weber of Northwestern University and Joshua Margolis of Harvard University examine various factors that led to the decline of research on human welfare at the individual, organization and society levels of analysis. They also suggest strategies for restoring scholarly attention to social objectives and public interests, reaffirming the research agenda that honors the management field's historic values.

By surveying the supply and demand for all empirical research published by the nearly 14,000-member Academy of Management between 1958 and 2000, the researchers show how management scholarship's fascination with economic performance increased steadily throughout that period, while interest in human welfare peaked in the late 1970s and then declined.

This paradigm shift reflects changing views about the purpose of business organizations and their social responsibilities. Firm managers no longer feel a strong obligation to ensure the welfare of their own workforce or society in general, but are focused instead on creating wealth, gaining competitive advantage, increasing productivity, and keeping a clear eye on outcomes that affect firm performance. According to Walsh and colleagues, resource and legitimacy pressures within business schools---now the primary homes to organization and management scholarship ---also have contributed to the decline in research on social objectives. Unlike economics and firm performance, enhancing social welfare may not be closely aligned with the interests of business philanthropists and the corporations that sustain so much of business education.

Similarly, these issues may not be crucial to the students and recruiters who also wield significant agenda-setting power. As a result, it will surprise no one to learn the results of a recent survey of MBA graduates: 75 percent of respondents felt companies' top priority should be to maximize value for their shareholders.

The key question then is whether business schools will lead or follow their many constituents in this crucial domain. Recent events may signal a significant change, however.

"The flagrant violation of societal standards in the corporate scandals and the rising call for business to attend to such social ills as AIDS bring these issues to the fore," Walsh says.

Corporations, operating in an interconnected global context, are being called upon to assume responsibilities that traditionally have been invested in nation-states. The problem is that we know little about how firms balance the sometimes-competing objectives of developing world-class goods and service, creating wealth for their investors, and improving the environmental and social well-being of the planet.

Several promising developments may help to reconnect the mainstream of organization and management scholarship with its original aspirations, according to the researchers. For example, the Aspen Institute is promulgating a new ranking system that rates business schools for their contribution to environmental and social-impact management, and a new scholarly journal published by Stanford Business School is promoting research on social innovation. The proliferation of centers devoted to social enterprise and ethics at business schools is another positive indicator.

Walsh and colleagues suggest several portals for introducing a heightened research focus on social welfare. It would be helpful to explore both how corporate strategies contribute to or detract from well-ordered societies and then examine how individual growth in organizations may further the public interest.

"Simply adding social welfare variables to our regression equations, in response to mounting external demands, will not address the deep challenge facing researchers and practitioners alike," Walsh says. "Our challenge lies in constructing a management philosophy that integrates our social and economic objectives."



For more information, contact:
Bernie DeGroat
Phone: 734.936.1015 or 734.647.1847
E-mail: bernied@umich.edu