Business School Research Roundup: October 2015

Disrupting the theory of disruptive innovation

Disruptive innovation, the theory which has made Harvard Business School’s Clayton Christensen a household name in business academia, has come in for some fresh criticism in an article published in the MIT Sloan Management Review.

Dartmouth Tuck’s Andrew King, a long-time critic of the theory coauthored the article with Baljir Baatartogtokh, a graduate student at Vancouver’s University of British Columbia (UBC). The principal charge they level is that disruptive innovation has too often been accepted as ‘gospel’ when the reality is that the theory’s effects – the displacement of established companies by those utilizing new innovations – doesn’t happen quite as often as has been suggested.

 “Stories about disruptive innovation can provide warnings of what may happen, but they are no substitute for critical thinking,” the authors write.

The Dartmouth Tuck professor and UBC student sought the insights of 79 experts (of which 58% were academics and 10%, financial analysts) on 77 business cases previously presented by Christensen. From these responses, the authors found that only 9% of cases fulfilled all four of the theory’s criteria. In addition, the responding experts signaled that companies were not displaced by new innovators in approximately a third of the cases. 

“We do not advocate discarding the theory of disruption. Rather, we recommend using its best parts in addition to classical approaches to strategic analysis,” the authors conclude.

It’s not the first time that disruptive innovation has attracted high-profile criticism. In 2014, an article in the New Yorker penned by Jill Lepore, a history professor at Harvard, also poured scorn on the theory’s wide-ranging applications and drew a stinging rebuke from Christensen in the process. She now welcomes the new paper and, according to the Boston Globe, has said: “For years, people who’ve pointed out the theory’s flaws, inconsistencies, and inadequacies have been shouted down or ignored, as if belief in disruption were a matter of faith and to question it on evidentiary grounds amounted to heresy.”

However, as yet Clayton Christensen still isn’t impressed by his theory’s detractors, calling the rigor of the research carried out by Dartmouth Tuck’s King and UBC’s Baatartogtokh into question. Indeed, the HBS professor has, in fact, always insisted that he welcomes examples that run counter to the theory as a means of strengthening it.   

HEC Paris on the purpose of management research

Why are we writing about management research conducted by business schools around the world? What value does it bring to the business world?

‘Building Knowledge through Research in Management’ is the latest animated video in an HEC Paris series designed to make business education that little bit more accessible. Having previously tackled the concept of socially responsible investment, HEC Paris now makes the case for management research’s value in helping companies improve their business.

It shows how management research can link findings from a range of academic disciplines to generate a better understanding of how companies can gain a competitive advantage. Examples on the topics of CEO salaries, index funds and consumer goods are given to demonstrate how management research provides businesses with answers that have a high impact potential – for those who choose not to ignore its findings! Check out the video from HEC Paris in full below:

Impact investing needn’t leave you short of returns in Wharton research

If you want to achieve social impact through investment, the oft-held assumption is that you should expect lower returns.

However, an impact investing report released by the Wharton School this month offers findings that run counter to this conventional way of thinking.

In analyzing the financial performance of 53 ‘impact-investing’ private equity funds, they found that they were able to “yield returns close to those of public market indices”.

“It represents an exciting initial advancement in our ongoing social impact research agenda,” said Chris Geczy, one of two Wharton finance professors who supervised the research in ‘Great Expectations: Mission Preservation and Financial Performance in Impact Investments’.

The report itself is the work of the Wharton Social Impact Initiative (WSII), a project established in 2010 with the remit of developing business strategies that can yield a positive impact on the world.

In spite of the positive finding, the initiative’s senior director, Jacob Gray, warned against making any far-reaching conclusions and pointed to the great variety – in aims and methods - seen in impact investing:

“The industry includes distinct market segments with very different social and financial value propositions. One must be very careful not to generalize the performance of the market-rate seeking segment of funds that we studied to the entire, multidimensional industry,” said Gray who also works with Wharton’s student-led impact investing organization, the Wharton Social Venture Fellows (WSVF).