What Knowledge is Useful? - Industries and Context
In its founding era, the School was created and staffed in large part by institution-oriented economists, including Edwin Gay and Melvin Copeland. Although they were increasingly marginalized within their own discipline, due to the increasing quantification of that discipline, Gay, Copeland, and their academic colleagues still thought in systematic ways about national and international economic trends, as well as patterns in specific industries and sectors. From the outset, therefore, HBS focused on "macro" issues, including industries, regulators, and larger economic contexts.
A sustained effort began in the summer of 1911, when two HBS researchers established the "Bureau of Business Research." The BBR began humbly—studying the actual costs of running a retail shoe business—and gradually expanded its scope of work. Additional retail trades—including wholesale grocers, grocery chains, retail general stores, retail hardware dealers, retail jewelers, and departments and specialty stores—were surveyed, and findings about operating norms in these trades were widely distributed. These cost studies continued through the early 1960s, when they were largely taken over by trade associations and government agencies. But for half a century, these efforts built strong ties between HBS and the retailing community, and cemented the School's reputation as a source of useful knowledge.
In the School's early decades, the curriculum included a number of industry-specific courses, most of which disappeared before World War I due to lack of student interest. An exception to that pattern came in the banking field, which had the advantage of a professorship devoted to the subject (the Converse Professorship in Banking and Finance, established in 1912). The chair's first occupant, Oliver M. W. Sprague, served with distinction both at HBS and with the Department of the Treasury in Washington, retiring in 1941. Arthur Stone Dewing was one of the most influential writers about banking in the 1920s, and George Bates—author of Investment Banking (1931), Investment Management (1959), and numerous cases and teaching notes—played a dominant role in banking studies at HBS for 40 years. Dan Throop Smith, who joined the faculty in 1935, became one of the first income-tax specialists at the School, with help from a young economist named J. Keith Butters. For the most part, Bates, Smith, and their colleagues in finance were more inclined toward field work and case studies than toward scholarly publications—an emphasis that prevailed among most HBS faculty groups in the prewar era.
In more recent decades, influential writers and teachers like Charlie Williams, Gordon Donaldson, Colyer Crum, Warren Law, Dwight Crane, Jay Light, and others have carried finance scholarship forward—on the teaching front, in research, and in the intersection of the two activities. Donaldson, for example, published Corporate Debt Capacity in 1961, which revolutionized how companies thought about the use of debt; in 1970, he followed that up with the influential Strategy for Financial Mobility.
Like most other industries, banking and finance became increasingly quantitative, with an increasing emphasis on analytical tools, and the School's research and teaching followed suit. The industry also became more globalized over the years, and the School's output has tracked this trend, as well. In 1992, with founding grants from sixteen financial-services companies, HBS established the Research Partnership on the Global Financial and Investment System, later renamed the Global Financial System Project, which brought together an interdisciplinary team in an ambitious research effort.
World War II brought HBS into contact with new industries, including the aircraft industry. A series of studies of military and commercial aviation during World War II and the postwar years expanded into a general study of the effects of taxation on growing enterprises, and brought new kinds of researchers—including economist John Lintner and historian Robert Schlaifer—to HBS. Schlaifer did pioneering work in bringing statistics to bear on business problems, and Lintner later achieved international renown as a primary author of the capital asset pricing model, or CAPM.
New industries became the subject of scrutiny at HBS during the postwar decades, sometimes based purely on the experience and convictions of the School's leaders. In the 1950s, for example, at the request of Dean Donald David, Harvard agricultural economist John D. Black and HBS professor Ray Goldberg began focusing on the business of agriculture, and (in 1957) coined the term "agribusiness." Over the subsequent half century, Goldberg emerged as one of the world's leading authorities in that field, authoring 23 books and more than 1,000 cases on agribusiness, and serving on the boards of more than 40 major agribusiness firms, farm cooperatives, and technology companies. Thought leaders from around HBS, and elsewhere, joined in Goldberg's effort, in part because it helped them think through issues in their own fields. Ultimately, Goldberg and his colleagues broadened their focus, and included colleagues from across Harvard, and from industry, in a major agenda-setting effort.
Sometimes the impetus for industry studies came from outside the School. In 1950, for example, General Motors chairman Alfred P. Sloan, Jr., agreed to underwrite research into the pros and cons of "big business," which was then under regular attack in the media. Multiple industry studies grew out of this project, the most notable of which was John G. McLean's and Robert W. Haigh's monumental The Growth of Integrated Oil Companies (1954). McLean subsequently became the chairman of Continental Oil (Conoco), and Haigh became dean of the Darden School at the University of Virginia. Several doctoral students, including future dean John H. McArthur, wrote dissertations on various aspects of the oil industry.
Reflecting the growing internationalism of the postwar economy, HBS researchers carried their industry studies abroad. In the late 1950s, for example, Ken Andrews—then teaching at IMEDE in Switzerland—conducted extensive research into the secretive Swiss watch industry, and produced a groundbreaking case series on an industry in its unique competitive context. Researchers Bruce Scott and John McArthur carried this tradition forward in the mid 1960s, when they spent four years studying and writing about the impact of the French national industrial development program. In Industrial Planning in France, Scott and McArthur concluded that the program had long since outlived its usefulness, and that U.S. policy-makers should not emulate it.
Bruce Scott, in particular, became intrigued with the idea of governments as players in the international economy. The cases he wrote from this perspective first began showing up in the Environmental Analysis for Management course in the early 1970s; by the end of that decade, Scott's extensive case explorations of the attitudes and actions of developed countries around the world—including the U.S., France, Japan, and the U.K.—led to the creation of a groundbreaking new course: Business, Government, and the International Economy (launched in 1979).
Sometimes it was student demand that focused the School on a specific industry. This was the case with real estate, which took root in the late 1960s with an oversubscribed doctoral seminar—Urban Land Development—offered by Phil David. The real estate courses were taken over and adapted by Howard Stevenson and Bill Poorvu, and continue to be a perennial favorite with second-year students.
The long-running second-year "capstone" course, Business Policy, served as a nexus for industry analysis for many years, looking at the intersection of a firm's "distinctive competence" and its industry context. Ken Andrews's and C. Roland Christensen's work in the field that they reluctantly called "strategy" led to the "SWOT" (strengths, weaknesses, opportunities, threats) framework—and subsequently, the "growth-share matrix"—that dominated the strategy-consulting field throughout the 1960s and 1970s.
The publication of Michael Porter's Competitive Strategy (1980) signaled the next phase in the development of industry analysis. His "five forces" framework for understanding the competitive landscape continues to shape the thinking of corporate strategists around the world. Competitive Advantage (1985), Competition in Global Industries (1986), and The Competitive Advantage of Nations (1990) extended his influential framework into new contexts. Porter's concepts also found their way into the MBA curriculum. The Industry and Competitive Analysis elective, introduced in 1978, proved highly popular with second-year students, with nearly 2,700 students enrolling in the first nine runs of the course.
Subsequent "generations" of Competition and Strategy (C&S) scholars have carried these traditions forward, with a continuing focus on knowledge that is useful to practitioners. Meanwhile, HBS faculty members from other intellectual areas contributed distinctive perspectives on strategic issues. In 1983, for example, Gordon Donaldson and Jay Lorsch collaborated on Decision Making at the Top, which brought together organizational and financial perspectives on strategy.
One recent arrival in the "industry" field—very broadly defined—is social enterprise, which was formally added to the School's intellectual agenda in 1993, when investment banker John Whitehead (MBA '47) gave a generous gift in support of research and teaching in the field at HBS. Like many other industries studied at HBS, social enterprise quickly gained international dimensions. Unlike some fields, however, social enterprise lent itself to a sustained and systematic global inquiry, across many kinds of institutions.