The Impact of Behavioral Assumptions on Management Ability: A Test Based on the Earnings of MBA Graduates

The paper explores the consequences that different behavioral assumptions in the training of managers may have on their future performance.  We argue that training with an emphasis on the standard assumptions used in economics (rationality and self-interest) is good for technical posts but may lead future managers to rely excessively on rational and explicit safeguarding, crowding out instinctive relational heuristics and signaling a “bad” human type to potential partners.  In contrast, the diverse, implicit and even contradictory nature of behavioral assumptions in management theories does not conflict with innate cooperative tools and may provide a good training ground for using such tools.  We present tentative confirmatory evidence by examining how the weight placed on behavioral assumptions in the core courses of the top 100 business schools influences the average salaries of their MBA graduates.  Controlling for the self-selected average quality of their students and some other’ characteristics of schools, average salaries are seen to be significantly greater for MBA programs whose core curriculum contains a larger proportion of management courses.