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Tuesday, January 31, 2006

Graduates of Higher-Ranked Business Schools Get More Pay, Not Necessarily Better Education

There is an interesting article in today's Chronicle of Higher Education, Graduates of Best Business Schools Don't Always Draw Top Pay, Study Finds, by Katherine S. Mangan.  The article reports on a new study published in the Academy of Management Journal (Dec. 2005/Jan.2006), Being Good or Being Known: An Empirical Examination of the Dimensions, Anyecedents, and Consequences of Organizational Reputation, by Violina P. Rindova (R. H. Smith School of Business, University of Maryland), Ian O. Williamson (R. H. Smith School of Business, University of Maryland), Antoaneta P. Petkova (R. H. Smith School of Business, University of Maryland) & Joy Marie Sever (Harris Interactive).  Here is the abstract of the study:

Management researchers recognize organizational reputation as a valuable intangible asset that contributes to organizational performance. However, they have paid limited attention to the extent to which reputation encompasses different stakeholders’ perceptions that may have differential effects on the positive economic outcomes associated with the possession of a favorable reputation. In this paper we argue that organizational reputation consists of two dimensions that reflect: (1) the extent to which stakeholders perceive an organization as being able to produce quality goods; and (2) the extent to which the organization is prominent in the minds of stakeholders. We develop and test a model of the distinct antecedents and consequences of these dimensions of reputation in the empirical context of U.S. business schools. We find that prominence, which derives from the choices of influential third parties vis-à-vis an organization, contributes significantly to the price premium associated with the possession of a favorable reputation.

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