There are three related questions here. First, in research oriented B-Schools, what provides the highest incentive for faculties – teaching productivity or research productivity? Second, how does research productivity of the faculty affect student outcomes? Third, how does teaching productivity of the faculty affect student outcomes? The first question has been unequivocally addressed in the award winning study by (Gomez-Mejia, Luis and Balkin, 1992). They find that faculty pay is very highly correlated to research productivity (as in top tier publications) and to a lesser extent to teaching productivity, (mostly when research productivity is also high). This they argue results from the efforts of the academic administrators to minimize the agency issue that arises from the potential motivation of the faculty to engage in self-serving behavior that is not part of their academic role (which ideally should be creation and dissemination of knowledge). However, their finding brings light to the fact that the administrators are concerned more with one dimension of agency – the creation of knowledge and less with the other dimension of agency – the dissemination of knowledge. Rather, it suggests that administrators consider the creation of knowledge to be more important than the dissemination of knowledge. Hence, this creates a second level of agency concern – from the perspective of the students who are consumers of knowledge.
The MBA students, who pay hefty fees towards a high quality business education, expect that they get the best out of the school, which in their terms involves not only the availability of highly knowledgeable faculty in the B-school, but also their ability and willingness to transfer relevant knowledge. However, the incentive structure to faculties creates an agency situation, wherein the faculty are knowledgeable, but are less motivated, or able or both to transfer relevant knowledge to the students. So, what could the correlation between research productivity and student performance actually mean? The ranking systems could be one source of bias. For example, the financial times pays high weights on faculty research productivity. Such ratings attract good researchers capable of doing good research (which further enhances the schools rating), good students who are capable of finding good jobs and good employers capable of providing good jobs. Therefore, from the perspective of the student outcomes, good research probably serves more as signal to the external world about the quality of the B-school than as a tool to enhance the knowledge of the students (which it ideally should be). However, this signal could completely go off target in predicting the process (whether student outcomes are attained through the dissemination of knowledge); though it might predict accurately the outcome (whether the students get high paying jobs).
One neat way to test this selection bias is to look at a situation where research is given a weight close to zero, yet students get excellent jobs. Consider the case of top tier Indian B-Schools like the various campuses of the Indian Institute of Management (IIM). If you go through the profiles of faculties of all the IIMs, you would find that the whole IIM system produces on an average less than one top tier publication (by the standards of say financial times) a year. However, an average graduate from these schools has around three offers in the best domestic and international companies before he or she graduates. On an average, they are paid more (inflation adjusted) than most top tier graduate is in US. Top companies woo these graduates even as they are in their first semester. Ironically, these B-Schools are ranked No.1 in India, but they do not even appear anywhere in the top 100 in global rankings. So what is the difference? The IIM system has a very stringent selection process for students. They select less that 0.1% (that is right, less than 1 in 1000) of the applicants each year. These select few are extremely good with numbers (which is what the consulting and financial industries yearn for). Hence, the first round of selection is already done. Hence, even if they do not get much from the MBA program, their raw brilliance would get them the best jobs. Of course, that does not mean that the students do not gain anything from the program. The program is very rigorous and the faculties are highly skilled at disseminating existing knowledge, even if they do not create much new knowledge.
