A shortage of business faculty with doctoral degrees has troubled academia for more than a decade, and although universities have deftly adjusted to keep teaching and research alive, the dearth of Ph.D.s in the marketplace eventually could undermine businesses' ability to compete.
The number of business doctorates awarded in 1994-95 was 1,327, according to the 2002 "Management Education at Risk" report by the Association to Advance Collegiate Schools of Business (AACSB International). That number declined 19.3 percent, to 1,071 in 1999-2000. The AACSB report predicted that the U.S. shortage of business Ph.D.s would reach 2,419 by the end of this decade.
"The anecdotal evidence is that the shortage is getting worse, particularly in accounting," says Jerry E. Trapnell, the AACSB's executive vice president and chief accreditation officer. "Finance has continued to be an area of concern as well."
The most recent figures available show that the number of business/management doctorates produced annually was 1,168 in 2005, a decrease of about 12 percent from the 1995 figure, according to Daniel R. LeClair, vice president and chief knowledge officer with the AACSB.
LeClair notes that 20 percent of U.S. business Ph.D.s will be employed in industry or government, not academia. In a labor market that is causing concern, that's a rare encouraging trend, because in 2000, more than 39 percent of the 1,071 business Ph.S.s took jobs outside academia, according to the National Science Foundation.
Universities have stepped up efforts to recruit quality Ph.D.s to their faculties and to encourage more business students to go on to doctoral studies. Faculty salaries are the biggest single expense category at most universities, and salaries are rising for Ph.D. business faculty. In fact, the average salary paid by AACSB's U.S. member schools increased 11 percent from 2000-2001 to 2001-2002.
Many new Ph.D.s can earn $125,000 or more a year in today's academic market, with demand even greater for those specializing in finance. Universities also sweeten deals by offering stipends worth tens of thousands of dollars, flexible teaching schedules and other perks.
"We focus intensely on recruiting year round instead of two or three months in the spring semester, as it was in the past," says Philip Regier, associate professor of accountancy and executive dean of the W. P. Carey School of Business. "We take advantage of targets of opportunity, displaying a willingness to hire top prospects on their schedule rather than on ours. We work much more diligently with spouses of potential faculty to locate positions for them either at ASU or within metro Phoenix."
Universities have compensated for the Ph.D. shortage by having their Ph.D.s delay retirement, by recruiting mid-career business executives and by emphasizing teaching instead of research.
"In the longer term, a shortage of Ph.D.-qualified faculty may mean that certain institutions will have accreditation problems or, more importantly, that fewer institutions will focus on research and creation of new knowledge," says Robert L. Mittelstaedt, dean of the W.P. Carey School of Business. "That could hurt business in subtle ways that will be hard to identify. Academics diffuse their learning through publications to other academics, practitioner journals, teaching students and being consultants directly to companies. If there are fewer academics doing groundbreaking research work there will eventually be fewer new ideas coming to market. That could hurt the competitive position of our businesses."
The lure of the private sector
Why aren't more people seeking business Ph.D.s?
"The opportunity cost is high," says Dennis Hoffman, director and associate dean for research and doctoral programs and director of the W. P. Carey School's L. William Seidman Research Institute. "There are better alternatives elsewhere."
Hoffman says it is very likely that many business students obtain a bachelor's or MBA degree, then hasten to the marketplace to make some money.
"We compete successfully for the best and brightest here at W. P. Carey," Hoffman says. "But we do have to pay more than we used to."
Regier says there are demographic as well as economic reasons that business students go to the private sector instead of seeking a Ph.D.
"Demographically, the baby-boom echo is not yet at the place where they will be considering a commitment to a Ph.D. program in business; that usually comes after several years of private-sector work," Regier says.
"Economically, there is a large opportunity cost to spending five or six years pursuing a top-quality Ph.D., and the costs are increasing as the gap between talent workers and less-skilled workers continues to widen. The more brains you have, the more opportunities and money you can make outside of academia."
Regier says such "foregone wages," as a percent of everything else in the economy, are getting larger all the time.
"I also think that what most potential doctoral students are familiar with are average starting salaries for academics in business -- not the range," Regier says. "The range is huge, with top students from good schools typically commanding salaries close to double what an average student will earn."
The poor get poorer
The shortage of Ph.D.s has hurt the quality of education at what Regier calls "schools near the bottom of the food chain."
"Top schools, like ASU, are hiring more and more clinical faculty -- full-time non-tenure-track faculty -- who can teach at a high level. These are often individuals who may have found their way to a lower-reputation school in the past as a tenured faculty member."
Trina M. Camilletti Callie makes a related point in "Faculty Salary Inequality in U.S. Business Schools," her 2006 University of Arizona dissertation.
"Salary inequality increased between 1998 and 2004," she states. "Analysis between institutions reveals that the highest paying 10 percent of institutions are pulling away, increasing stratification between the most prestigious institutions and the others. Although private school faculty earn more than their public counterparts, salary inequality among faculty at public institutions increased more rapidly."
Mittelstaedt says one reason fewer people are becoming business academics might be because they know little about the career track and what it offers.
"They just feel they are not interested in an academic career in a broad sense," Mittelstaedt says. "If they knew more about it they would find that a top academic in a business-related discipline can make as much as some CEOs of mid-size companies (without stock options) through a combination of salary, teaching executive education, consulting and board seats."
Business feels the pinch
The Ph.D. shortage is not just an academic issue. It could make U.S. businesses less competitive.
"If nothing is done, we believe the long-term impact [will be that] business school research could suffer and impact the pace in which we advance knowledge of business," the AACSB's LeClair says. "Management talent is a major factor that impacts innovation and the competitiveness of business in today's economy. If the quality of management education suffers due to the lack of investment in doctoral education, U.S. businesses could suffer."
As the AACSB report stated in 2002: "Doctoral shortages are becoming the choke point in realizing the future vision for business."
The Ph.D. shortage is a major concern for the practicing profession of accounting because it affects its supply chain and the ability of the academic profession to keep curriculum current in a dynamic world, says Philip Reckers, a W. P. Carey professor of accountancy and vice president of education with the American Accounting Association.
"The practicing profession wants an ample support of entry-level talent but they also want that product well-armed with the knowledge and skill set needed to perform in today's world," Reckers says. "The accounting world and accounting practice has changed markedly in recent years, due, yes, to recent scandals and reforms, but also due to globalization, technological change and competition."
At least two Big Four accounting firms now offer extra stipends to individuals to help subsidize their Ph.D. studies, Reckers says. He says the Ph.D. shortage disproportionately affects universities with fewer resources.
"In the United States, smaller second- and third-tier state schools are in desperate waters," Reckers says. "In accounting, 50 percent of current faculty will retire within the next eight years. Current production rates of Ph.D.s can only replace about half of those if all U.S.-produced Ph.D.s stay in the U.S."
A global marketplace
The Ph.D. shortage is worldwide, Reckers notes, and therefore it is hard to determine the effects on international competition. Also, many current Ph.D. students in the United States are from other countries.
"A significant element of the academic community is internationally mobile and becoming more so," Reckers says. "However, while diversity is on the increase in this sense, it is on the decline in another sense: Many current Ph.D. candidates in the U.S. have no prior professional experience -- in auditing, taxes, etc. As such, they tend to migrate within accounting to less 'professional-oriented' sub-disciplines such as financial accounting, which is based more exclusively on general economics and finance."
Emerging countries have long done without Ph.D.-credentialed faculty, but as more nations adopt free-market economies and eschew central planning, the need for accountants and auditors has surged, Reckers says.
"Demand for students is going up; the ability to produce well-educated students is declining," Reckers says. "Some argue that a free-market system will deal with this 'over time.' That is, prices for faculty will go so high that eventually more people will flood into Ph.D. programs and we will find a point of equilibrium. The problem here is that the buyers are not free-market participants; most are state-supported schools and the education they 'sell' is at regulated prices, controlled tuition rates, so the prices at which they 'sell' cannot go up to accommodate the rising prices. So, there is no easy market solution.
"The privatization of public education has seen deans pressed to operate state business schools as a business, that is with a greater focus on bottom-line budget numbers," Reckers says. "This pressure has developed, as over the last decade the percentage of state budgets to higher education has diminished even while the number of students has increased. Deans thus must either increase revenues and/or cut costs. Deans have decided that Ph.D. programs are expenses that can be cut. They will argue that it is not a good proposition to train new Ph.D.s who then take jobs at other schools."
Schools do not hire their own graduates for fear of inbreeding.
"Thus a prisoner's dilemma emerges," Reckers says. "Everyone has cut back and everyone is now paying the price."
"The bottom line, though, is that research and teaching are a calling -- not something you do because you think it would be a decent job alternative," Dean Mittelstaedt says. "If you do not have a strong desire to learn continuously and find ways to teach others through your learning you will not be interested in an academic business career. I do think there are more folks who could be interested but are not and that is the fault of those of us in the field for not reaching out to young people with great potential."
- The Ph.D. shortage in business schools has been developing for well over a decade, and there are no easy solutions.
- The pinch is especially tight in specialized fields, including accounting and finance.
- Higher salaries and a range of perks can help schools attract Ph.D.s, but they increase a university’s biggest cost category: compensation.
- Universities can do a better job of recruiting young Ph.D. students and mid-career businesspeople by emphasizing the rewards of teaching and underscoring the fact that an academic can also serve on corporate boards and be a business consultant.
- The Ph.D. shortage could hinder the development and adoption of new and better management practices.