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Research Findings

Research Findings

Mapping the power of fossil capital

April 15, 2019
Image: Garth Lenz

None of the G20 countries are on track to combat climate change under the UN 2015 Paris Agreement, and among them, Canada stands out as the country with the worst carbon emissions per capita. The Corporate Mapping Project has found out why. Canada’s fossil fuel industry is a cohesive corporate community driving a ‘new denialist’ story deep into the federal government and into key institutions such as the University of Calgary. But we can change that story.

The Corporate Mapping Project (CMP), hosted by the University of Victoria since 2015, with the Canadian Centre for Policy Alternatives – British Columbia as a key partner, aims at understanding the economic, political and cultural power of Canada’s fossil fuel industry. As a collaboration between researchers and activists, the goal of the project is also to develop strategies for fostering socially just alternatives to fossil fuel.

The economic nucleus of Canada’s fossil fuel industry is the Alberta tar sands, where our findings show that five large producing companies and two major pipeline companies control most of the action. These corporations and the pipelines that flow mostly north to south make up a labour process that is highly capital intensive, and fast becoming more automated through driverless trucks and the like.

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Research Findings

People with disabilities turn to gig work

April 10, 2019

During the recent government shutdown, approximately 800,000 workers went without pay. Some government workers turned to gig work to make ends meet: Twitter is filled with stories of workers who began driving for Uber or Lyft during the shutdown as a stopgap measure.

Government workers are not alone in turning to gig work to make ends meet. The government shutdown is one example of systemic failures that leave many Americans without a safety net. In an ongoing study, I find that people with a disability also turn to gig work to get by. People with disabilities do gig work because they need a flexible job that allows them to stop working when they can no longer work that day, and to take breaks as needed.

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Research Findings

The Impact of African-American Enclaves on Economic Mobility under Jim Crow

April 4, 2019

In downtown Durham, North Carolina, a sign commemorates Black Wall Street, a district that once hosted some of the most prominent businesses owned by African Americans in the city. The sign is located on a four-block stretch of Parrish Street, which is now populated by relatively mundane urban eateries, bars, luxury condos, and the Durham County Board of Elections. But between the late 1800s and 1960s, the area became known nationwide as a center of black enterprise and upward mobility.

The success of Black Wall Street was all the more striking because it occurred in the U.S. South during the era of Jim Crow. It was a time of white supremacist ideology, when state and local laws dictated the separation of blacks from whites in schools, public transportation, public amenities, and many private businesses. On Parrish Street and in the neighboring community of Hayti, black residents looked for paths toward economic advancement despite the hostile historical conditions.

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Research Findings

The Real Mommy War Is Against the State

April 1, 2019

A lawyer and I stepped into a windowless conference room in her office building in Washington, D.C., and she reflexively closed the door. I had forgotten to restock my tissues and would soon regret that. By then, I had been interviewing American mothers about their work-family conflict for several weeks. I asked women I had just met what their bosses said to them when they announced a pregnancy, what their parental leave was like, if they could ever work remotely when a child was sick.

This time, I didn’t get even 20 minutes into the conversation before the woman I was interviewing dissolved in tears.

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Research Findings

The One Percent Glass Ceiling: Gender Dynamics in Top Income Positions

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March 28, 2019

It is clear from research on corporate leadership that a glass ceiling prevents many women from occupying top executive or CEO positions.

In a recent article, we find that the glass ceiling is far more extensive than previous literature finds: women are not just excluded from top leadership positions, but rather they are excluded from nearly all top income positions regardless of occupation. We also find that progress on this front has been stalled for the last twenty years.

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Research Findings

Motherhood, Fatherhood, and Changes in Earnings

March 25, 2019

Women pay a wage penalty when they become mothers, earning about five percent less than equally qualified childless women.

Five percent may not seem like much, but over the course of their lives, mothers will lose well over $100,000 in wages – money that could have been spent on a modest home, their children’s college education, or over ten years of groceries.

This is bad news for those who care about mothers, children, and families.

In a recent study, I asked whether the wage penalty had declined over the past few decades. Are mothers’ lives—at least in terms of their earnings—improving? Are we, in fact, witnessing a trend toward equality? The answers were, unfortunately, mixed. Some have done better, and others have done worse.

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Research Findings

Do business schools really matter? Yes, and it’s because of their main products: MBAs

March 20, 2019

Do business schools—and their products, MBAs—really matter?

Business school professors often lament that business education has no impact on the real world—that they waste their energy debating esoteric theories that nobody outside the academy pays attention to. But at the same time, business school critics claim that through excessive risk-taking and profit-maximizing at any cost, MBAs drove the economy into the financial crisis and the great recession a decade ago .

In a recent study, we examined how much business schools really matter. Does business school education really shape students’ minds and behaviors many years later, when they have reached top positions at major corporations and financial institutions?

We explore this question by looking at how CEOs engage in diversifying acquisitions over the last three decades. We chose to study corporate diversification because business professors dramatically changed their views about it during the period under study. This allows us to see how the business school curriculum impacted students.

Up until the 1960s, business school professors viewed diversification as a valuable strategy. Kenneth Andrews, a Harvard Business School (HBS) professor, wrote in 1951, “The purposeful diversification of American corporate enterprise has been accomplished with the hope of attaining greater stability in organization and earnings, greater efficiency in the use of company resources, greater economy in marketing operations, or greater returns from the exploitation of unexpected opportunity and peculiar economic conditions.”

Thoughts on diversification turned into skepticism in the 1970s and outright criticism in the 1980s. This reflected a broader shift in business education. As Rakesh Khurana meticulously described in From Higher Aims to Hired Hands, the 1970s witnessed a rise of financial economics as the dominant discipline in business schools.

In particular, agency theory in financial economics became mainstream and dominated both academia and practice. Based on the belief that managers are agents who work for the shareholders, agency theory views diversification as a prime example of managerial opportunism at the expense of shareholders’ wealth.

During the 1970s and the 1980s, Michael C. Jensen, another HBS professor well-known for his articulation of agency theory, promoted a new agency-theoretic orthodoxy that corporate managers should avoid diversification and instead focus on the firm’s core business.

While theories and evidence against diversification emerged in the 1970s, many U.S. firms remained diversified well into the 1980s. Why did the decline of corporate diversification unfold so slowly?

We believe it was because corporate strategy reflects the views of top decision makers, and change in strategy follows only from a new crop of decision makers. It took 20 to 30 years for those MBA students who absorbed a skeptical view on diversification in the 1970s and the ‘80s to climb up corporate hierarchies, replace CEOs at major firms, and put the brakes on diversification.

To test our argument, we collected data on 2,031 CEOs who ran 640 large U.S. corporations from 1985 to 2015. We also gathered information on their educational background, such as the school they attended for an MBA and their year of graduation. We split our sample into three cohorts—CEOs who earned an MBA before, during, and after the 1970s—and examined whether these groups made different strategic choice about diversification.

Here’s what we found: Compared with CEOs without an MBA, CEOs in the first cohort, who earned an MBA before the 1970s, were 17% more likely to pursue diversification at some point during their career. The later cohorts of CEOs, those who earned an MBA in the 1970s and later, were less likely to pursue diversification than their non-MBA counterparts, by 24% and 30%, respectively.

We also conducted some additional tests. A quarter of CEOs with an MBA in our data graduated from HBS, where Michael Jensen taught agency theory beginning in 1985. Given his elevated role in popularizing agency theory, we expected that being exposed to his teaching had an enduring effect on students’ views of diversification. We found that CEOs who attended HBS after Jensen joined the school were 83% less likely to engage in diversification than those who went to HBS before that.

We also compared HBS-educated CEOs with the CEOs who had MBAs from other schools or who didn’t have an MBA. HBS education had a strong negative effect on diversification only after Jensen’s arrival.

If being exposed to modern financial economics was a crucial factor in altering MBA graduates’ views on diversification, we would expect to see the negative effect of MBA education on diversification to be stronger for CEOs who graduated from business schools with a top-ranked finance program. We found this to be accurate. The effect of MBA education during or after the 1970s was observed only for CEOs who trained at one of the top 50 business schools in finance.

This has implications that go far beyond corporate diversification strategy. The late business professor Sumantra Ghoshal warned that business schools had direct and negative influences on management practices, contributing to major corporate scandals and economic crises. 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.

What business schools teach matters, because their products—MBAs—eventually become powerful and faithfully follow what they’ve learned. The impact of business schools on society only becomes clear after many years.

Read More

Jiwook Jung and Taekjin Shin, “Learning not to diversify: The transformation of graduate business education and the decline of diversifying acquisitions.” Administrative Science Quarterly 2018

Image: HBS1908 via Wikimedia Commons (CC BY-SA 3.0)

Research Findings

How inequality leads to its own legitimization

March 12, 2019

Research has demonstrated a dramatic rise of income inequality in the West. Today, across advanced capitalist countries, the top ten percent of households take home about a third of all income and own two-thirds of all wealth. 

Despite what scholars, journalists and some politicians consider a worrying trend, there is no evidence that people have grown more concerned about inequality. In fact, citizens of more unequal societies are less concerned than those in egalitarian societies. How to make sense of this paradox?

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Research Findings

Climate Change Isn’t Hurting Everyone: White Middle Class Americans Benefit from Natural Disasters

March 7, 2019

Recently, the United Nations’ Climate Change Conference in Poland, the U.S. National Climate Assessment Report, and severe forest fires, hurricanes and winter storms have called attention to just how devastating climate change already is and will continue to be. Yet, what these events often fail to highlight is who benefits from this devastation. Understanding that piece of the puzzle is critical for building better policy approaches to climate change.

One of the most tangible effects of climate change in the United States is the mounting cost and frequency of high-impact natural hazards. In 2018 alone, mudslides engulfed large segments of Montecito, Hurricane Florence flooded a large swath of the Carolinas, Hurricane Michael destroyed communities along the Gulf coast, and California experienced some of the most destructive wildfires in history. These are just some of the most widely known events. Hundreds of other natural hazards caused millions more in damage and loss of life across the country.

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Research Findings

How mobility of R&D workers opens new avenues

March 3, 2019

R&D employees moving from one employer to another is a frequent, yet controversial event. On the one hand, inventor mobility has been shown to have a positive effect on overall innovative activity. On the aggregate level, the fast development of new technologies in regional clusters such as Silicon Valley is driven by dynamic labor markets and high turnover rates of engineers, programmers, or developers. On the firm-level, learning-by-hiring is a fast and efficient way to acquire external knowledge.

From the perspective a firm that loses key employees, outbound mobility, on the other hand, creates costs of finding suitable replacements and is associated with the risk of losing not only employees but also crucial knowledge. Knowledge that potentially is employed by the hiring firm to compete in related markets. Recent media coverage has revealed a number of lawsuits caused by one firm’s R&D employees moving to a competitor in industries ranging from semiconductors and mobile phones to pharmaceuticals and autonomous-driving vehicles.

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