Learning Not to Diversify: The Transformation of Graduate Business Education and the Decline of Diversifying Acquisitions

Jiwook Jung, Taekjin Shin

Research output: Contribution to journalArticlepeer-review


Once a preferred strategy, corporate diversification into disparate lines of business has gradually declined in the U.S. over the past several decades. We argue that changes that occurred in a closely related domain—graduate business education—are important in understanding variation in de-diversification across firms. Building on a historical account of the transformation of business education, we explain how the rise of financial economics and agency-theoretic logic in business education changed students’ views about diversification. Nearly 20 years later, these MBA graduates rose to top decision-making positions and put the brakes on diversification. Using data on CEOs who ran 640 large U.S. corporations from 1985 to 2015, we show that CEOs who earned an MBA before the 1970s actively pursued diversification, whereas the next cohort of CEOs, who had been exposed to agency-theoretic logic in financial economics, refrained from it. We also demonstrate that the degree of managerial discretion moderated the effect of the CEO’s MBA education. Our study shows that institutional change in one domain (i.e., business education) contributed to change in another domain (i.e., corporate diversification), albeit with a considerable time lag.

Original languageEnglish (US)
Pages (from-to)337-369
Number of pages33
JournalAdministrative Science Quarterly
Issue number2
StatePublished - Jun 1 2019


  • corporate diversification
  • graduate business education
  • institutional change
  • managerial cognition

ASJC Scopus subject areas

  • Arts and Humanities (miscellaneous)
  • Sociology and Political Science
  • Public Administration


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