Perhaps the brightest research glow, in his view, “is the whole field of finance that started with the Chicago School in the Sixties and Seventies” — home to Nobel Prize-winners like Myron Scholes; Robert Fogel (for using economic tools to understand historical institutions and trends); Gary Becker (extending microeconomic analysis to human behavior); Merton Miller (applying microeconomics to corporate finance); and Ronald Coase (showing how property rights and transaction costs shape economic activity).
Many fans of more-pragmatic business-school research see the University of Chicago as a model for others, both in its applied studies and in the way it combines strong executive education with the rigor of pure academic work. (Still, finance theory — from Chicago and elsewhere — comes in for its share of criticism. Recently, some writers have been suggesting that severe weaknesses in the Black-Scholes model, for example, exacerbate downturns, rather than cushioning them.)
Heading in the Right Direction
Hawawini notes that in addition to being a rare finance voice on the AACSB task force, he was also the panel’s sole European. (A native Lebanese, he now holds a chair in finance at INSEAD in Fountainbleau, France.) And from that perspective, he sees major differences in the corporate-academic relationships that exist in Europe, compared to the approach in the United States. “The MBA came late in Europe, so more executives did not go to business school,” he observes. The relationship between business-school professors and corporate finance directors and other executives is closer there. “Thus, you have a number of reasons why executive education is more central to a business school in Europe.” And because executive training provides a healthier part of a school’s income — roughly half at INSEAD and some others — that helps make research serve practice more directly, as well.
Meanwhile, “U.S. schools rely more on funding from alumni. That’s why younger U.S. business schools, for historical reasons, don’t have this level of funding.”
But the professor believes that — even before the AACSB recommendations begin to take hold — American business education may have started heading in the right direction on its own. “Fewer researchers are addressing purely conceptual issues these days,” he says. “It’s not just in finance, but elsewhere, like marketing and behavior.”
Adds Hawawini, “You could argue that the [AACSB] report is really catching a trend.”
In finance, research has continued along practical lines in numerous areas, not just at Chicago, but at school after school. “I think the whole issue of transparency, and how transparency and asymmetric information affects trading, will become increasingly important,” he says, for example. “And market efficiency; now that we recognize that, yes, markets are efficient, the paradox is that you must continue to make money. You’re going to have to have some private information.”
The professor agrees that Wharton has emerged as another model school, like Chicago, for the way it combines its executive education and research, and for its development of more popular channels like “Knowledge at Wharton.”
“That’s the direction more schools should be going in,” he says. “They need to integrate their executive education into the heart of their business education offering.” And continue to encourage “the younger professors to get close to the business people early on in their careers. They’re the ones that do most of the research.”