Damned by Our Own Theories: Contradictions Between Theories and Management Education

Universities create and widely disseminate knowledge. Yet, in their management schools, some of the theories presently being used contradict the premises of management education. In economics and finance, the theory of efficient markets means that gains cannot come from trading upon knowledge made public through management education. Strategy theory aims for sustained competitive advantage through rare resources or positioning, but knowledge only weakly assists the development of rare resources, and disseminating knowledge about strategy through management education destroys its competitive advantage. Agency theory leads to doubts that managers will use enhanced knowledge to benefit the organization and, while specifying controls to curb managers, it also doubts that these controls will be applied. Institutional theory pictures organization as ritual more than rationality; the key function of managers is public relations, through manipulation of the truth in a way inimical to educational values. Studies of judgmental biases reveal flaws in managerial judgments, rendering moot the idea of gains from equipping them with superior knowledge. A sounder approach is to emphasize theories that identify effective managerial practices.