Styrhe 2014 Neoliberalism and Management Research

International Journal of Organizational Analysis
The influence of neoliberalism and its absence from management research

Alexander Styhre
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Alexander Styhre , (2014),"The influence of neoliberalism and its absence from management research",
International Journal of Organizational Analysis, Vol. 22 Iss 3 pp. 278 - 300
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IJOA
22,3
The influence of neoliberalism

and its absence from
management research
278
Alexander Styhre
Business Administration, University of Gothenburg, Gothenburg, Sweden
Received 30 April 2013

Revised 30 April 2013
Accepted 3 May 2013
Abstract
Purpose The paper aims to address the recent debate over the relevance lost of business school
research and points to the establishment of neoliberal economic policy during the past three decades as
an example of social change that has not been thoroughly theorized in business school research.
Design/methodology/approach The literature on neoliberalism is reviewed and, more
specifically, its implications for the financialization of industry and the widespread use of financial
theory in corporate governance. The paper outlines some of the consequences of neoliberalism, pointing
out the connections between the growth of the finance industry and the 2008 financial crisis.
Findings The paper demonstrates that the financialization of industry and the institutionalization of
finance theory, as the guiding corporate governance model used in the new millennium, have led to a
concentration of capital in the finance industry. As a consequence, other productive investments have
been postponed. Despite such shifts in corporate governance and economic policy more broadly,
neoliberalism is a relatively marginal topic of discussion in business school research.
Social implications The study stresses the need for broadening the scope of business school
research and addressing more long-term institutional changes in economic policy and corporate
governance.
Originality/value The paper emphasizes the need, not only for promoting practitioner relevance in
business school research, but also for enacting an ambitious research agenda of broader social
relevance.
Keywords Neoliberalism, Corporate governance, Shareholder value, Financialization,
Business school research, The 2008 financial crisis
Paper type Research paper
International Journal of
Organizational Analysis
Vol. 22 No. 3, 2014
pp. 278-300
Emerald Group Publishing Limited
1934-8835
DOI 10.1108/IJOA-04-2013-0662
Introduction
The expansion of neoliberal economic and political policies has privileged market-based
activities. While welfare state expansions and progressive tax policies reduced
economic inequality between the mid-1930s and the mid-1970s, the increasing influence,
from the end of the 1970s, of neoliberal policies has served to restore class power and
economic inequality. In the 1990s and in the first decade of the new millennium, in
particular, the increased emphasis on financialization, [T]he increasing role of financial
motives, financial markets, financial actors and financial institutions in the operation of
domestic and operational economies (Dore, 2008, pp. 1097-1098), has led to an
accumulation of profits in the finance industry and a sharp rise in CEO and top
management compensation (Tomaskovic-Devey and Lin, 2011). Shareholder value
ideologies and other doctrines promoting the financial performance of the firm have
excluded other stakeholders and undermined other productive investment. By 2002, 45
per cent of all profits made in the US economy were derived from the finance industry.
Accompanying neoliberal policies that have served to restore financial inequality, there
is a growth in debt in the middle- and working-class strata, and, in pioneering neoliberal
states such as the USA and the UK, there is also an increase in poverty and the expanded
use of penal practices, i.e. more people than a few decades ago are either poor or in penal
institutions (Jones, 2011; Wacquant, 2009).
This storytelling about the triumph and alleged decline of neoliberalism is contrasted
here against ongoing discussions regarding the lost relevance of business school
research. During this period, with market-based activities gradually displacing the
bureaucratic welfare state organization and bringing management to the very heart of
operations (Meyer and Hammerschmid, 2006; Farrell and Morris, 2003), very little
research is being conducted at business schools and other scholarly communities which
deal with management and organization into the influence of neoliberalism in everyday
society. Even though widely recognized scholars such as Bourdieu (2003) have
addressed neoliberalism as a major shift in policy over the last few decades, in the field
of critical management studies as well, in other respects ready to criticize forms of
managerialism, there are few publications or studies that criticize neoliberalism
up-front. Two notable exceptions are Greys (2004) analysis of the future role of the
business school grounded in a wider discussion about the role of the institution of
the university in the neoliberal era (Lorenz, 2012) and Loackers (2013) study of the
culturpreneurs emerging in an increasingly market-based culture sector. Lanes (2010)
ethnography of involuntary entrepreneurship among computer industry workers is
another study pointing to the direct or indirect effects of neoliberal norms, policies and
practices. Otherwise, it is the field of accounting research that leads the way in terms of
critically examining the implications of neoliberalism, e.g. the ineffective use of
regulatory practices such as audits (Mennicken, 2010; Sikka, 2009; Kipnis, 2008), the use
of specific calculative practices that determine risk in the finance industry (Poon, 2009)
and the use of rankings and other forms of commensuration (Kornberger and Carter,
2010; Free et al., 2009). Additionally, few accounting studies more directly scrutinize the
funding of the academic scholars who have served the role of advancing a neoliberal
analytical framework (Chabrak, 2012. See also Himmelstein, 1992, pp. 147-149). This
rather limited and marginal critique of neoliberalism has largely failed to make an
imprint on the mainstream management literature.
Below, three tables represent the outcome of a literature search in the full-text
databases EBSCO Business Source Premier and EBSCO Academic Search Elite
(Tables IIIII).
The results show that, of the articles being published using either the terms
neoliberalism or neoliberal, either as a subject term or in the title, only a relatively
Subject terms (SU)/Title (TI)

[No additional entry word]
Management
Managing
Organization
Organizing
Note: Conducted 11 June 2012
Neoliberalism
Neoliberal
682/233
29/1
0/4
5/0
3/0
0/246
0/25
0/2
0/25
0/0
Influence of
neoliberalism
279
Table I.
EBSCO business source
premier literature search
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280
small proportion also use the subject terms management, managing, organization
or organizing or use these terms in article titles. In addition, when searching for the use
of these terms in the four A-journals, namely, the Academy of Management Journal
(AMJ), the Academy of Management Review (AMR), Administrative Science Quarterly
(ASQ) and Organization Science, only two papers published in ASQ were identified
using the subject term or the title word neoliberalism/neoliberal. Also, a journal such as
Organization, with its explicit editorial objective of providing critical views of
management and organization, provides no more than five articles addressing
neoliberalism. These meager results are curious given that neoliberal thinking emphasizes
market-based activities and transactions and thus cherishes management as a professional
domain of expertise capable of handling commercial and administrative activities. While
these results may be tentative and may lack more-refined inferential statistics that provide
more solid evidence of the lack of neoliberalism in management studies and organization
theory, they are arguably indicative of the failure of business school research to address one
of the most significant changes over the last three decades, i.e. the shift from
administration to management justified by neoliberal thinking and policies.
This paper discusses the failure of business school research to productively theorize
and empirically examine the consequences of neoliberal economic policy in terms of
being indicative of the relatively mild interest in making a contribution to the social
sciences. Unlike, for instance, political scientists and sociologists who take on a broader
social responsibility in pursuing research programs that are generally socially relevant,
business school research is primarily preoccupied with its own hierarchical
organization and the distribution of status and prestige across the academic field.
Business school researchers do not pay sufficient attention to what Braudel (1980) called
la longue dure, the long cycles of change in history. As a consequence, much research is
of marginal relevance not only to practitioners the key group to attract for proponents
Subject terms (SU)/Title (TI)
Table II.
EBSCO academic search
elite literature search

Management
Managing
Organization
Organizing
Neoliberal
1472/533
41/3
0/6
10/2
2/0
0/612
0/3
0/1
0/0
0/1
Subjects terms (SU)/Title (TI)

Table III.
EBSCO business source
premier literature search,
four management studies
and organization theory toptier journals and a critical
management theory journal
Neoliberalism

Academy of Management Journal (AMJ)
Academy of Management Review (AMR)
Administrative Science Quarterly (ASQ)
Organization Science
Organization
Neoliberalism
Neoliberal
682/233
0/0
0/0
2/0
0/0
5/0
0/246
0/0
0/0
0/1
0/0
0/0
of relevance-driven research but also to other stakeholders in society. Thus, the

failure of business school research is not only a question of its relevance but also of its
possibility to accommodate ongoing social changes and shifts in perspective. In other
words, unlike a lot of other social and economic science, the loss of what Khurana (2007,
p. 369) calls the cultural authority of the business schools is not only a matter of the
wrong questions being of little interest to practitioners but also an effect of a vague sense
of long-term shifts and, to use an Annales School concept, new mentalits in society.
The paper is structured accordingly: first, the issue of relevance lost in
management research is addressed. Second, the concept of neoliberalism is addressed,
as well as its consequences for economic policy and the distribution of income and
economic resources, finishing the historical overview with the events of the 2008
financial meltdown. Following that, some implications for management studies and
business school research are addressed, not so much in terms of having difficulties
providing practical know-how to managers, administrators and policy-makers but more
in terms of a concern about the lack of a more systematic engagement with social issues
and concerns; in this case, the connections between neoliberalism, as the dominant
political framework over the past few decades and managerial practice.
Relevance lost?
The business school is, perhaps, the single most important North American contribution
to the contemporary university system. The medieval university first developed in Italy,
eventually spread north of the Alps. In the 19th century, the polytechnic university and
the medical school developed in France. During that century, Germany was
undoubtedly the leading research nation, enabling the transition from the medieval
university of contemplation and critique to modern, experimental science (Lenoir, 1994;
Hobsbawm, 1975). In 19th century, the social sciences, including sociology, criminology
and political science, were instituted. The last major academic invention was, arguably,
the creation of the business school, sites where the secrets of commerce and economic
law were taught. The business schools have their roots in the professional interest
organizations of the medieval guilds and in the Italian scuola dabbaco, a form of trade
school where the sons of Italian merchants were taught reading, writing and
rudimentary Latin, as well as the practices of arithmetic, book-keeping and other
relevant skills needed in their future careers (Carruthers and Espeland, 1991; p. 49; Lane,
1973, p. 141). In 1881, the University of Pennsylvania opened its Wharton School of
Business, still a leading business school today. In the USA and Europe, business schools
were opened in the following decades, including Dartmouth (1900), Harvard (1908), the
Stockholm School of Economics (1909), Stanford (1925) (Ruef, 2002, p. 77). From the
beginning, like the medical schools opened in close proximity to the hospitals in Paris
and other major French cities (Bynum, 1994), the business schools were supposed to
train engineers and businessmen in basic practices and law for them to be able to serve
their professions. It was not until the end of the 1950s, when critical reports started to
portray business school research as poorly scientifically developed, that the new
pursuit, i.e. becoming a science of management, was enacted (Corley and Gioia, 2011).
Ever since the early 1960s, business school research and, more specifically,
management studies have been haunted by an inability to reconcile what has been
referred to as rigor and relevance. This puts business school researchers in a
double-bind where either choice (scientific rigor or practical relevance) will inevitably
Influence of
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lead to criticism from the other camp. One of the consequences of this dilemma is
ongoing discussions regarding the lost relevance of business school research (for a
sample of papers like these, see Bennis, 2010; Palmer et al., 2009; Gulati, 2007; Bennis and
Toole, 2005; Starkey and Madan, 2001). This discussion portrays management studies,
on the one hand, as esoteric and irrelevant to practitioners or, on the other, as
theoretically underdeveloped or even trivial. As soon as business school research brings
in theories on even the lowest level of abstraction, it is criticized for being inaccessible to
practitioners, but when such systematic analytical models are left out, the research
findings are branded as anecdotal and subjective accounts. Some commentators have
persistently argued that research needs to be developed as a scholarly and professional
domain of expertise (Kieser and Leiner, 2009a; 2009b Grey, 2001); if the research
produced is of little relevance to practitioners, the practitioners and their inability to
digest even modestly abstract thinking will be to blame. There is little hope that these
two camps may be able to reach an agreement, but the controversy is still indicative of
what Khurana (2007), in an excellent review of the conditions of the business schools in
the new millennium, points out as being the major problem for both industry and the
institution of the business school, that is, the lost authority of business school
researchers. Unlike the fields of law or medicine, where the professors are undisputed
authorities, business school professors are infrequently treated with such veneration.
Instead, the management guru industry, at best, having loose couplings with the
business schools but essentially being populated by people with no interest in pursuing
university careers, supply industry with new ideas and concepts (Jackson, 2001;
McGovern, 1997; Huczynski, 1996). The economic and cultural success of such gurus is
indicative of what has been proposed by some commentators, that unlike, for example,
law (as a socially enacted framework of rules and regulations) and medicine (as the
project of exploring and mapping the material substratum of the human body),
management practice is not of the same order as these two other disciplines;
management practice is just simply not commensurable with law or medicine because
they are based on strict constructionism (law) or a realist epistemology (medicine), while
management is based on a pragmatic and non-foundational epistemology, where
things either work or they dont, regardless of their possible connections with
underlying social laws or regularities (Czarniawska, 1997). In other words, even the
most beautiful theorem based on decades of detailed empirical observations may fall flat
unless practitioners believe in it, i.e. management practices and their relevance,
effectiveness, quality and so forth, being a matter of belief and not of factual conditions
verified by scientific procedures (cf. Pfeffer and Sutton, 2006). Managerial practice is,
thus, a matter of inspiration and motivation, i.e. it is based on emotionality rather than
being the outcome of the accumulation of facts (Kieser and Leiner, 2009,2009b). It is,
then, no wonder that celebrities and former sport stars can find an alternative source of
income as lecturers at leadership conferences and workshops. When managerial
practice becomes a matter of emotions, the intellectualist ideology of the community of
researchers remains quite impotent in promoting new managerial thinking.
Speaking of the lost relevance of business school research is, then, a declaration
that already contains a long series of assumptions. Arguably, the relevance lost is not,
however, simply a matter of failing to produce practical useful knowledge (this is, in fact,
precisely what business school research does on an everyday basis) or of being overtly
theoretical (in comparison to, for instance, sociologists and psychologists, management
research tends to rely on relatively elementary theoretical frameworks), but in terms of

failing to account for broader social changes. One such topic is the shift in focus from the
regime of embedded capitalism during the post-World War II period to a neoliberal
economic and political agenda. Only in the event of blatant corporate scandals, such as
the much-debated Enron case, are there calls for close attention to be paid to wider social
changes and ideologies (Adler, 2002); however, after such turmoil, things tend to sink
back to normal and return once again to a purely marginal interest in what happens
outside of organizations and firms and in the industries studied by business school
researchers. In the following, the case of neoliberalism will be examined, as well as its
long-term consequences for economic equality and for the distribution of wealth and life
chances in contemporary society. As the literature will show, there are great
opportunities for making connections between the neoliberal agenda dominant over the
past few years, management practice and the study of such practices. This disjunction
is addressed in the final section of the paper.
On neoliberalism and its consequences
The concept of neoliberalism
Neoliberalism is by no means a unified or singular concept that is easily defined (Plehwe
and Walpen, 2006, p. 2). Instead, Saad-Filho and Johnston (2005, p. 1) say, it is
impossible to define neoliberalism purely theoretically [] neoliberalism straddles a
wide range of social, political and economic phenomena at different levels of
complexity. Austrian and Chicago schools of economics, Ordo-liberalism, the critique
of Soviet-style planned economies and Libertarianism are all branches of the
neoliberalism tree. A common theme in all these schools is the emphasis on
market-based activities:
For neoliberalism, the market symbolises rationality in terms of an efficient distribution of
resources. Government intervention, on the other hand, is deemed undesirable because it
transgresses that rationality and conspires against both efficiency and liberty, argues Munck
(2005, p. 61).
For Wacquant (2009, p. 306), neoliberalism is a hybrid term that is still rooted in
economic theory and economic ideologies:
Whether singular or polymorphous, evolutionary or revolutionary the prevalent conception of
neoliberalism is essentially economic: it stresses an array of market-friendly policies such as
labor deregulation, capital mobility, privatization, a monetarist agenda of deflation and
financial economy, trade liberalization, interplay competition, and the reduction of taxation
and public expenditures.
Wacquant (2009, pp. 306-307) continues by saying that neoliberalism is a transnational

policies project where institutions such as the IMF, the WTO (World Trade
Organization), the OECD, the World Bank and so forth, populated by economists,
lawyers and other technical experts and constituting what Sklair (2002) calls a
transnational economic class, promote neoliberal ideologies and policies. Studies of the
IMF and the WTO (Best, 2012; Chwieroth, 2010; Griffin, 2009; Chorev and Babb, 2009)
show that, while these organizations host a variety of perspectives and demonstrate a
pragmatic attitude toward accomplishing lasting effects (Chorev and Babb, 2009, p.
477), they have nevertheless moved away from being part of what was called embedded
liberalism during the post-World War II period and have increasingly become pillars of
Influence of
neoliberalism
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the global neo-liberal order (Chorev and Babb, 2009, p. 460). Brown (2006) summarizes
the consequences of this global shift in policy thus:
Part of what makes neoliberalism neo is that it depicts free markets, free trade, and
entrepreneurial rationality as achieved and normative, as promulgated through law and
through social and economic policy not simply as occurring by dint of nature. Second,
neoliberalism casts the political and social spheres both appropriately dominated by market
concerns and as themselves organized by the market rationality. That is, more than simply
facilitating the economy, the state must construct and construe itself in market terms, as well
as develop policies and promulgate a political culture that figures citizens exhaustively as
rational economic actors in every sphere of life [] Third, neoliberal political rationality
produces governance criteria along the same lines, that is, criteria of productivity and
profitability, with the consequence that governance talk increasingly becomes market-speak,
businesspeople replace lawyers as the governing class in liberal democracies and business
principles replace juridical principles. (Brown, 2006, p. 694)
Neoliberalism [] proposes to encourage entrepreneurship, investment, and long-run
economic growth through reductions in subsidies, tax reform, tax cuts, stabilization of the
money supply, the free flow of capital, and, central to the current analysis, the market-oriented
reform of state-owned industries, add Henisz et al. (2005, p. 873).
Neoliberalism is the economic and political doctrine of free markets par excellence
(Amable, 2011).
Consequences of neoliberalism
Harvey (2005) names three events during the closing years of the 1970s as being of major
importance to the neoliberal agenda: Deng Xiaoping started to deregulate the Chinese
economy, Federal Reserve chairman Paul Volcker enacted low-inflation policies on the
basis of University of Chicago economic theory as advanced by, for instance, Milton
Friedman and Margaret Thatcher became Prime Minister of the UK, paving the way for
a new political agenda influenced by, for instance, the writings of Friedrich von von
Hayek (1960), e.g. his The Constitution of Liberty. Hayek was the foremost
representative of the Austrian School of Economics, prescribing the deregulation of
markets and a lower degree of political control. Milton Friedman, perhaps the
best-known 20th century economist after John Maynard Keynes and both a proponent of
monetarist policies and a figurehead of the University of Chicagos economics faculty,
was greatly inspired by Hayeks theories of self-regulating economic systems (von
Hayek, 1944). Friedman (1962, 2002) famously advanced the idea that economic freedom
precedes political freedom in fact, economic freedom is a prerequisite for political
freedom (Davies and McGoey, 2012, p. 70; Amable, 2011, p. 5):
Economic arrangements play a dual role in the promotion of a free society. On the one hand,
freedom in economic arrangements is itself a component of freedom broadly understood, so
economic freedom is an end in itself. In the second place, economic freedom is also an
indispensable means towards the achievement of political goals (Friedman (1962, 2002, p. 8).
Moreover,
Viewed as a means to the end of political freedom, economic arrangements are important
because of their effect on the concentration or dispersion of power. The kind of economic
organization that provides economic freedom directly, namely competitive capitalism, also
promotes political freedom because it separates economic power from political power and in
this way enables the one to offset the other (Friedman (1962, 2002, p. 8).
Encouraged by such theories of political economy, Thatcher declared war on

institutions that she thought curbed capital freedom, e.g. unions and state-controlled
corporations such as British Rail. Thatcher famously developed a political rhetoric that
effectively captured the essence of her overturning of traditional British institutions:
The phrases There is no such thing as society! and Every man a capitalist! (Margaret
Thatcher) (cited in Jones, 2011, p. 62) became slogans for the Thatcherist regime.
Freedom of choice became another neoliberal catch-phrase indebted to Friedman
(Friedman and Friedman, 1979). In Dengs China, too, capitalist slogans such as To
get rich is glorious were used (Fang, 2010, p. 162). In the late 1970s and early 1980s, four
decades of neoliberal consolidation in communities such as the Mont Plerin Society,
founded in 1947, in academic departments and various institutions and in
neoconservative communities such as Orange County in Southern California (McGirr,
2001), was translated into actual political power as neoliberal and neoconservative
politicians took office.
Writers critical of neoliberal policies argue that they have always, to use Harveys
(2010, p. 218) phrasing, been
[] a blatant support for finance capital and capitalist elites (usually on the grounds that
financial institutions must be protected at all costs and that it is the duty of state power to
create good business climate for solid profiteering).
For instance, Mizruchi (2004, p. 607) says that the Reagan administration, elected on the
basis of the poor financial and economic performance during the 1970s and Reagans
pro-business and tax-reduction policies, [w]as so eager to serve the business
community that firms in some cases received more than they had demanded. While
neoliberal economists advocate de-regulation and the elimination of state control to
promote the circulation of capital for the benefit of the whole economy, e.g. Reagans tax
cuts for the richest where
[] earners in the middle fifth of Americans would now pay 9.8 per cent of their income in
payroll taxes, while those in the top 1 per cent now paid 1.4 per cent of their income in payroll
taxes (Madrick, 2011, pp. 170-171),
the consequence was whether it was intended or not may be disputed a growing gap
in income distribution. Neo-liberalism chooses inequality, remark Ericson et al. (2000,
p. 554):
Within a neo-liberal regime of responsible risk taking all difference, and the inequalities that
result from it, is seen as a matter of choice. If one ends up poor, unemployed, and unfulfilled, it
is because of poorly thought-out risk decisions.
Dumnil and Lvy (2004, p. 139, Table 15.6) demonstrate that the proportion of assets
controlled by the richest one per cent of households has returned to the 1930s level. No
one will, write Dumnil and Lvy (2004, p. 37),
[] be surprised to observe that neoliberalism, which reinforces many capitalist features at the
center and the peripheral countries, added even more of [the] propensity to reproduce and
widen inequalities and injustice.
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In Thatchers Britain, perhaps the prominent laboratory for neoliberal politics, poverty
levels grew from 5 million in 1979 to close to 14 million in 1992 (Jones, 2011, p. 62). The
number of homeless Britons [s]oared by 38 per cent between 1984 and 1989 alone
(Jones, 2011, p. 10). As traditional working-class jobs in manufacturing and mining
disappeared (Lazonick and OSullivan, 2000, pp. 18-19), new jobs emerged in the service
sector but these paid roughly a quarter lower than traditional manufacturing jobs
(20,000 vs 24,343 per annum in 2008 figures) (Jones, 2011, p. 151). However,
somewhat surprisingly, given the emphasis on shareholder value creation as an
overarching goal in the neoliberal view of corporate governance, both the number of
managers and the share of resources allocated to management positions grew between
1984 and 2001 (Goldstein, 2012; Gordon, 1996). [S]trategies intended to streamline
organizations and reduce managerial labor costs, ultimately rendered firms more
managerial concludes Goldstein (2012, p. 278. Original emphasis omitted). Shareholder
value creation, in other words, was primarily targeting labor costs and trade union
influence (Fligstein and Shin, 2007; Lazonick and OSullivan, 2000), two impediments to
economic growth for neoliberal and neoconservative thinkers and policymakers
(Mizruchi and Kimeldorf, 2005, p. 218). In addition, between 1993 and 2010, in England
and Wales, the prison population nearly doubled, from 44,500 to around 85,000 (Jones,
2011, p. 214), with a similar increase having been observed in the USA (Wacquant, 2009).
Penalization is, suggests Wacquant (2009, p. 302), an [i]ndividualization of the social
problems that the state, at the bureaucratic level of collective will, no longer can or cares
to treat at its roots, and consequently the prison operates as a juridical garbage
disposal into which the human refuse of the market society is thrown. In Wacquants
(2009, pp. 302-303) view, neoliberal policies are the principal driver of this loss of social
politics (Ericson et al., 2000).
In addition to the increase in poverty and imprisonment, during the neoliberal era, the
middle class debt ratio increased sharply as financial capital was piped into markets to
propel consumption and boost, for example, house prices (Krippner, 2011). During the
early 1980s, caused by the negative US trade balance, an overrated dollar and high
savings ratios in, for instance, Japan, foreign capital flooded into the USA and the
Reagan administration issued bonds at an unprecedented rate. As a consequence, a
debt-financed consumption boom occurred in the US economy. (Krippner, 2011, p.
104). In the USA in 1980 the average household owed around $40,000 (in constant
dollars) but now its about $130,000 for every household, including mortgages, reports
Harvey (2010, p. 17). Today, even after the 2008 financial crisis, seventy per cent of USA
economic activity depends on consumerism (Harvey, 2010, p. 107). Similar figures are
available from the UK:
In 1980 the ratio between debt and income was 45. By 1997 it had doubled, before reaching an
astonishing 157.4 on the eve of the credit crunch in 2007. As peoples purchasing power slowed,
more and more credit was splashed out on consumer goods. Between 2000 and 2007,
consumers spent 55 billion more than their pay packets, courtesy of the plastic in their wallet
or hefty bank loans (Jones, 2011, p. 158).
Not only has the inflow of financial capital led to a substantially higher household debt
ratio, national and regional governments are also struggling with higher levels of debt.
The financialization of neoliberalism, thus, has deep-seated implications for the
approaching period.
Events in 2008
Tomaskovic-Devey and Lin (2011) account for the political, economic and financial
changes in the USA that led to the financial debacle of 2008. Legitimized by, for example,
shareholder value programs (Ezzamel et al., 2008; Dobbin and Zorn, 2005; Engelen, 2002;
Hillman and Kiem, 2001) and an emphasis on treating the individual firm as a bundle of
financial resources (Davis, 2009a, 2009b; Fligstein, 1987), profits being returned to the
financial industry reached unprecedented levels during the early years of the new
millennium:
Financial sector profits as a proportion of all profits in the economy grew slowly between 1948
and 1970, dropped across the 1970s, and increased dramatically after 1980 [] This trend
peaked in 2002 when 45 per cent of all taxable profits in the private sector were absorbed by
finance sector firms (Tomaskovic-Devey and Lin, 2011, pp. 539-540).
In the early 1980s, conflicts between the Federal Reserves inflation-fighting agenda and
the deficit-spending Reagan administration were overcome by the influx of foreign
direct investment in the USA (Tomaskovic-Devey and Lin, 2011, p. 543). Debt-financed
consumption was widespread in the 1980s. In addition, the deregulation of the financial
markets made financial investment more appealing than investment in productive
assets in the real economy and, as financial speculation was unleashed, the financial
markets became volatile. In the face of such challenges, new derivate financial
instruments, e.g. variable rate mortgages, credit default swaps, and mortgage-based
and other derivative securities, were developed (Tomaskovic-Devey and Lin, 2011, p.
545). Neoliberal doctrines and economic theory, in the University of Chicago tradition,
were opposed, in principle, to all regulatory control and oversight, and a new financial
industry, equipped by the newly developed finance theory and the legitimacy provided by
the science of finance economics which proposed that markets were efficient and would
not fail to price assets correctly (Fama, 1970), was developed. Finance theory-trained CEOs
were succeeding more manufacturing-minded business leaders and a managerial
commitment to long-term investment was being displaced by shareholder value ideologies
(Davis, 2009a); paying attention to stock-prices, short-term became a key managerial
priority. These new corporate governance policies further complicated investment in new
productive capital as financial investment was more attractive:
Institutional investors encouraged corporate CEOs to adopt the aspects of agency theory they
preferred, focusing on short-term stock market value goals and tying executive compensation
to stock prices (Tomaskovic-Devey and Lin, 2011, p. 546).
CEOs acting in accordance with the predominant finance theory ideology were
generously rewarded. CEO and top management compensation has risen sharply since
the early 1990s: The median levels of total real annual CEO compensation more than
double from $1.18M in 1994 to $2.80M in 2007 (in real 1994 dollars), report Lord and
Siato (2010, p. 43). Berchuk and Grinsteins (2005) quantitative analysis of CEO
compensation in relation to performance and firm size reveals that this growth in
compensation cannot be attributed to more complicated managerial assignments.
Instead, conclude Berchuk and Grinstein (2005, p. 287),
[c]hanges in size and performance can explain only 66 per cent of the total 166 increase, or about 40
per cent of the total increase, with 60 per cent of the total increase remaining unexplained.
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The explanation for this increase in CEO compensation could be growth in human
capital investment, i.e. top management developed its skills during the period, the
influence of the so-called small number markets (Williamson, 1975), i.e. having a small
pool of candidates available for top management positions makes compensation levels
soar, or, a more critical but perhaps also more plausible explanation, that a larger
proportion ceteris paribus of the firms income is allocated to CEO and top management
compensation. We thus conclude that the relationship between pay and firm attributes
has changed substantially during the period under consideration, remark Berchuk and
Grinstein (2005, p. 289) dryly. Khurana (2002, p. 191) suggests that this increase in
compensation is indicative of the influence, even hegemony, of what Khurana refers to
as investor capitalism:
Golden parachutes, golden handcuffs, and the whole panoply of mechanisms for lavishly
rewarding CEOs without regard to performance all of which were unheard of before the age of
investor capitalism became standard features of CEO pay packages (Khurana, 2002, p. 191).
Such claims are supported by empirical evidence suggesting that CEOs who announce
layoffs the cutting of labor costs being the principal driver of shareholder value
creation (Fligstein and Shin, 2007) earn an additional total compensation of 22.8 per
cent (Brockman et al., 2007, p. 117). CEOs who downsize their corporations are rewarded
for their commitment to shareholder value creation. Under all circumstances, there is a
widening gap between the average salary and CEO compensation:
At the turn of the millennium, top bosses took home forty-seven times the average workers
wage. By 2008, they were earning ninety-four times more (Jones, 2011, p. 163). Rushkoff (2009)
writes:
[T]he average CEOs salary [grew to] 179 times the average workers pay in 2005, up to from a
multiple of 90 in 1994. Adjusted for inflation, the average workers pay rose by only 8 per cent
from 1996 to 2005; median pay for chief executives rose 150 per cent. The top tenth of 1 per cent
of earners in America today make about four times what they did in 1980. In contrast, the
median wage in America (adjusted for inflation) was lower in 2008 than it was in 1980. The
number of severely poor Americans defined as a family of four earning less than $9,903 per
year grew 26 per cent between 2000 and 2005. (Rushkoff, 2009, p. 181)
If the minimum wage had risen as fast as CEO pay, it would now be $24.13 an hour
instead of $5.15, which is less, in real dollars, than it was in 1970, notes Khurana (2002,
p. 191). Regardless of such excessive top management compensation, an industry
increasingly managed on the basis of financial theory and primarily concerned with
providing an adequate return on investment for its owners is likely to benefit the finance
industry. Tomaskovic-Devey and Lin (2011, p. 549) provide evidence of such conditions:
Banking, in particular, seems to have profited most consistently from deregulation of financial
markets and the resulting ability to collect economic rents from society overall. Employees of
securities and commodity firms, which were historically organized as partnerships, were able
to capture windfall compensation from the increasing flow of investment activity.
They continue:
In 2008, almost a quarter of the GDP and more than a quarter of the profits accumulated in the
finance sector. In the sector, employee compensation went from being above average for the
economy overall to about 60 per cent higher than in the rest of the economy. These shifts
represent a transfer of between 5.8 and 6.6 trillion 2011 dollars in income into the finance
sector, mostly as profits (Tomaskovic-Devey and Lin, 2011, p. 553).
Tomaskovic-Devey and Lin (2011, p. 553) suggest that, in the economy, by and large, one
mans gain is another mans loss, and studies of direct investment patterns in industry
have demonstrated that [f]inancialization actually reduced nonfinancial firms capital
investment in new productive assets and increased the share of their cash flow diverted
to the finance sector as increased profits. That is, profits and financial resources, that
could have been invested productively in strengthening, for example, the
manufacturing industry against foreign competitors, have been brought back to Wall
Street. On the contrary, financial traders and investment bankers regard themselves as
being in the service of the entire economy while, in fact, they are primarily concerned
with extracting as much profit as possible from industry. Hos (2009) ethnography of
Wall Street investment banks is revealing as regards which attitudes have developed
over the last few decades:
[One informant talked] about the struggle between the owners of capital versus managers,
where managers had squandered the fruits of capital by sharing them with other constituents.
He spoke passionately about the poor stewardship and excess of managers and how it was
Wall Street investment bankers who realigned managers to their true purpose of increasing
shareholder value [] Wall Streets shareholder value perspective is that employment is
thought to be outside the concern of public corporations. Job loss was certainly a sad event, but
beyond the responsibility of corporate America (Ho, 2009, p. 128).
Ho continues:
If you look at the old days, Stan Clark [one of Hos interlocutors] told me, all the companies
were basically fat, dumb, and stupid. [T]hey did not change. They were not making [enough]
money. The [managers] didnt care. Now, you have Wall Street with all their shareholders []
You cant just be dumb, fat, and happy [] You have to change. Shareholders are looking at
[] your excess expenses [] Back in the old days, wide town employment was big a thing.
They didnt even hardly lay off. Nowadays, they have to lay off because shareholders say,
Look, you have all this excess overhead [] You have to cut out the fat. We want to a lean,
mean operation. So [] Wall Street is definitely making a much more efficient corporate
America (Ho, 2009, pp. 130-131).
As a consequence, Wall Street investment bankers regard themselves as heroic figures

serving to clean up a mess that has been going on for decades:
Corporate organizations are today measured and treated according to how Wall Street values
and evaluates financial assets. The precarious balance that corporate America had wrought
between catering to stock prices and administering to the multiple and conflicting participants
of the corporations has been tipped decisively in favor of financial values and interests [] To
hear Wall Street tell the narrative of stock markets and shareholder ascendancy in the late
twentieth century is to hear a narrative of justice prevailing after prolonged hijacking of the
modern corporation by a fat, dumb, happy bureaucracy (Ho, 2009, p. 158).
A gradual loss of respect for traditional (i.e. non-financial) industries in combination

with a self-perpetuating elite culture in the finance sector as early on as the late 1980s,
author Tom Wolfe was accounting for the extravagant Wall Street culture in his book
The Bonfire of the Vanities, confirmed by Ho (2009) two decades later created a finance
industry characterized by little empathy but a high degree of risk-taking (for
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ethnographic accounts of the finance industry, see Lpinay, 2011; Roth, 2006; Zaloom,
2006; Abolafia, 2001).
The aftermath
In their conclusion, Tomaskovic-Devey and Lin (2011, p. 556) point financialization out
as the most fundamental product of neoliberalism, noting that the 2008 bailout of the
financial system, no matter whether this was an inevitable political act aimed at
securing world capitalism, nevertheless saved a set of firms that had increasingly, since
around 1980, been accumulating the economic surplus of the entire economy
(Tomaskovic-Devey and Lin, 2011, p. 554). The cost of bailing out the finance industry
has been estimated, by the IMF, as 12.7 per cent of GNP in the USA and 9.1 per cent in
the UK (Callinicos, 2009, p. 88). Indeed, as the Gospel of Matthew states, For unto every
one that hath shall be given, and he shall have abundance: but from him that not hath
shall be taken away even that which he hath. For example, only as far back as 2007, on
the eve of the financial crisis, Goldman Sachs CEO Lloyd Blankfein alone pocketed $68
million in financial compensation for his work (Sorkin, 2009, p. 4). Critics contend that,
after the 2008 events had been dealt with, little had changed in the finance industry and
the same decision-makers who brought us the financial crisis are still serving in many
executive functions (Madrick, 2011).
The story of the 2008 financial meltdown and its aftermath, as examined by, for
example, Sorkin (2009) and Stiglitz (2010a, 2010b), is also the story of neoliberalism per
se. For many commentators, the 2008 financial crisis was the derailment of the neoliberal
doctrine, persistently refusing political regulation. Left-wing social theorists, such as
Slavoj iek, argue that the the utopian core of liberalism is still viable, as the 2008
events were interpreted in their favor, not the contrary, as most serious commentators
would suggest:
The way the market fundamentalists react to the destructive realities of implementing their
recipes is typical of utopian totalitarians: they blame all failure on the compromises of those
who realized their schemes (there will still be too much state interventions, etc.), and demanded
nothing less than an even more radical implementation of their doctrines (iek, 2009, p. 19).
Black (2005), writing about fraud in the American Savings and Loan industry in the
early 1980s, which was one of the first major financial crises during the neoliberal era,
argues that ideology and beliefs play a key role in economic theory and policy (Kogut
and Macpherson, 2011). The passage is worth citing at length:
Economists know almost nothing about fraud. The dominant law-and-economics theory is that
there is no serious control fraud, so it is not worth studying [] prominent USA economists
generally believe that regulation is the problem and deregulation is the solution. The deregulation
ideology was the initial problem, but the fact that their policies led to disaster also brought acute
embarrassment. They had the normal human wish to avoid taking responsibility for their
mistakes. Their embarrassment was particularly acute because they consider themselves the only
true social scientists and believe that theory and facts, not ideology, drive their ideas []
Economists missed the problem [of fraud] because of social class and self-interest. Few economists
are prepared to see business people, particularly patrons, as criminals. Many of the top financial
economists worked for the control frauds, and the collapse created such embarrassment that they
felt compelled to deny that their employers were frauds [] Economists developed a conventional
wisdom about the debacle and have not reexamined it [] All aspects of the conventional wisdom
proved false upon examination. (Black, 2005, pp. 12-13)
Returning to the most recent financial crisis of 2008, an event that the American
Financial Inquiry Commission report portrayed as [a] fundamental disruption a
financial upheaval, if you will that wreaked havoc in communities and neighborhoods
in this country, Deutschmann (2011) does not hesitate either to point out who should be
held responsible mainstream economists:
The crisis [] did not only mark a socio-economic rupture, but a scientific one too. The
profession of academic economics, which took the main responsibility of advising political
decision makers, failed almost completely in a double sense: not only were mainstream
economists unable to forecast the crisis; they were even able to take the mere possibility of such
a collapse into account. Moreover, it seems that the widespread failures in financial regulation
and supervision went back not to a small degree to the pervasive influence that the free market
ideology of mainstream economics had on key actors in the political and finance system []
The crisis resulted in a dramatic loss of reputation of a long tradition of neoclassical
mainstream economics, culminating in the once celebrated efficient market theories of Fama
and Lucas (Deutschmann, 2011, p. 349).
In Davies and McGoeys (2012, p. 66) account, [T]here were significant warning signals
of impending crisis, signs which were actively ignored or concealed by a range of
parties. Fuelled by a belief in the markets infallible capacity to price assets correctly,
and the emphasis on the accuracy and authority of their models on the part of the
proponents of economic theory, the financial analysis, suggest Davies and McGoey
(2012), failed to distinguish between the map and the territory, the calculated price and
the actual worth of financial assets:
[T]oo many financial traders were beginning to mistake their economic models for economic
reality, allowing tidy representations of risk to stand in the way of messy situations of
uncertainty [] The agents of knowledge and the objects of knowledge are both active
participants in an integrated system of calculation, which eventually reaches such a level of
complexity that neither prices nor models can be trusted any longer (Davies and McGoey, 2012,
p. 73).
Still, at the end of the day, someone has to pay the bill, and it is quite likely that that this
will be the taxpayers of these countries. iek (2009, p. 13) writes: In a supreme irony,
socializing the banking system is acceptable when it serves to save capitalism.
Socialism is bad except when it serves to stabilize capitalism. People who had been
refusing state interventions for decades were suddenly anxious to condone political
action in the face of a collapsing finance system, with Austrian School of Economics
theories about self-regulation becoming a moot question. Throughout the European
Union, the post-2008 period has been characterized by national debt crises in countries
such as Greece, Ireland, Italy, Portugal and Spain; in the UK, the Cameron-led
Conservative-Liberal alliance has introduced strict economic policies for the coming
years. At the G20 meeting held in the spring of 2009, then British Prime Minister
Gordon Brown, Camerons predecessor, declared the Washington Consensus, i.e.
the neoliberal agenda carried forward by institutions such as the IMF and the WTO,
to be dead (Chorev and Babb, 2009, p. 459). Whether that is, indeed, the case
remains to be seen.
Discussion
All professional domains need to integrate as well as regulate themselves and to gain
their justification and legitimacy by serving a wider society (Abbott, 1988; Larson,
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1977). Struggles over domains of jurisdiction are, thus, an inevitable and ongoing
process in professional fields. However, such jurisdictional domains are ultimately
based on the performativity of the profession (Mackenzie et al., 2007; Mackenzie, 2004;
Mizruchi and Brewster, 2001; Pickering, 1993) what it is capable of accomplishing
within a social setting. Needless to say, jurisdictional struggles and debates are not
exactly underrepresented in the field of management studies. For instance, Baum (2011)
recently published a paper in which he shows that the citation pattern for papers
published is skewed and that citation ratios in, for example, so-called A-journals offer a
deceiving measure for evaluating the quality of all the research published in these
journals. A few papers are cited quite frequently but many, even in the prestigious top
journals, are cited less frequently, paving the way for what Baum speaks of as a
free-rider problem, i.e. the authors of less-cited papers are capable of benefitting from
the accomplishments of the authors of more-frequently cited papers. Baum is a highly
respected and most prolific researcher who makes lots of contributions to, for example,
strategic management theory and institutional theory (Ingram and Baum, 1997; Baum
and Oliver, 1991). Still, in this setting, his paper serves the role of indicating how
business research scholars are preoccupied with their own internal procedures and with
the distribution of authority, status and prestige in the professional field. Baum (2011) is
worried about the routines of evaluating research excellence and about some
researchers unjustifiably benefiting from the work of others. Fairly enough, that is a
relevant topic of discussion in the protection of professional jurisdiction; however, in
terms of social outreach and wider social relevance, these concerns are of interest only to
a relatively small group of researchers at elite universities. Most people would be happy
to publish in the Academy of Management Journal or in the Administrative Science
Quarterly because that would be first-hand recognition of the quality of their scholarly
work; they would be less concerned about the free-riding problems they might be
accused of. Baum (2011) is right in claiming that the mindless uses of bibliometric
analysis is a threat to scholarly autonomy, but it is still tempting to claim that Baum is
barking up the wrong tree: the loss of understanding of wider social changes and needs
is a bigger threat to business school research than the possibility of a few researchers
gaining unwarranted recognition. After all, citation frequencies can be checked
paper-by-paper.
The absence of theories of neoliberalism in business school research is one thing, and
calls for more attention to liberalism in these quarters is quite another. The qualitative
distinction between is and ought (generally credited to David Hume) implies an
epistemological leap that includes preferences and ambitions; just because business
school researchers ignore neoliberalism, this does not mean that they are doing the
wrong thing, unless there are good arguments in favor of a revised research agenda. To
state a normative position, business school research would benefit from making more
explicit connections with the literature on neoliberalism developed in, for instance,
sociology, political science and economic theory because neoliberalism and its
market-orientation implicitly presuppose that managerial practices and competencies
are always in place already, i.e. domains of expertise and professionalism basically
falling within the domain of jurisdiction of business school researchers. That is,
business school research would benefit from broadening its scope. Simultaneously, the
literature on neoliberalism would be enriched by a business school research agenda
perspective.
The ongoing discussion regarding the loss of relevance is indicative per se of the
difficulties involved in making business school research more relevant; the lack of
initiative is translated into passive complaints regarding the role and status of business
school research, at times peppered with nostalgia over some allegedly glorious past
(Bennis and OToole, 2005), a form of collective repenting for the failure to accomplish a
closer connection between the business school, industry and society at large. The
inability to address the neoliberal agenda that has been dominating the world economy
and political quarters for at least 30 years is used here as an example of how the very
idea of relevance is not a matter of failing to provide practitioners and policy-makers
with ready-made templates for action, but a lack of capacity to make a closer
connection between managerial and administrative problems and wider social
policies and debates. To simplify the argument, one can distinguish between p-relevance
(practitioner relevance) and s-relevance (social relevance). p-relevance is the
production of theories and know-how that can be absorbed and put to use by
practitioners, while s-relevance is the production of theories and know-how drawing on
socially relevant conditions. p-relevance is not a major concern for the time being, as the
business school is the largest university discipline in many countries and because most
people planning a career in industry or public administration choose business school
training. On the contrary, s-relevance is a more pressing concern. Business school
research and management studies have a relatively low status which is why, to use an
anecdotal example, sociologists attending management conferences always clarify that
they are, in fact, sociologists and nothing else and play a marginal role in setting the
research agenda. As Corley and Gioia (2011, p. 15) point out, eclecticism is one of the
principal features of management studies, entailing that the field of management
studies has been constituted as a patchwork of influences. Not that there is anything
wrong with that (Czarniawska, 1998, 2001), but it easily makes management studies
somewhat marginal in the development of the social sciences (see, for example, Suddaby
et al., 2011, recent special issue editorial in the Academy of Management Review).
Sociologists and political scientists set the agenda and then the minor social sciences,
e.g. management studies, apply the theoretical frameworks developed. This is one
possible regime of the division of labor in the social and economic sciences, but there
may be many opportunities for paving the way for a higher degree of s-relevance in
business schools. Managerial practice has a recursive relationship with ongoing social
change, and failing to see how one informs the other (e.g. neoliberal politics and
accompanying managerial practices) is a major concern for any scholarly discipline.
A research agenda addressing neoliberalism either directly or indirectly is welcome.
Good, solid scholarly work has been done by Gerald Davis and colleagues (Davis, 2009a,
2009b; Davis et al., 1994), for example, to examine the shift from conglomerate form to
core business activities. This literature on organizational form and structure, including
the theory of both firm literature and corporate governance literature, would benefit
from a clearer connection with the writings on neoliberalism. Other researchers, often in
the field of accounting, have examined the consequences of shareholder value ideologies
(Ezzamel et al., 2008; Dobbin and Zorn, 2005). This literature makes explicit references to
neoliberal policies and ideologies and is therefore exemplary in unearthing the role of
neoliberal thinking in establishing new corporate governance practices. A related field
of research that deserves more attention concerns the role of finance officers in corporate
governance (Zorn, 2004; Fligstein, 1987), more or less an immediate effect of the
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increased emphasis on shareholder value creation. Recently, economic sociologists have

made valuation, i.e. the determination of economic worth, a topic of investigation
(Fourcade, 2011; Karpik, 2010; Aspers, 2009; Beckert and Aspers, 2011). Management
studies may benefit from drawing on this literature.
In addition to these two bodies of work, more research should be directed toward the
connections between neoliberalism, as a political and economic doctrine, and the use of
managerial practices in new settings. For instance, the literature on new public
management is one such field of research; however, neoliberalism is often mentioned en
passant but is given little detailed attention. In the literature on corporate social
responsibility (CSR) too, the neoliberal tradition of actively counteracting initiatives to
implement regulatory control should be given more attention, possibly rendering CSR
as an activity initiated to primarily satisfy consumer activist groups. Because
neoliberalism is a complex term and charged with ideological content, it is questionable
whether or not mainstream management studies and organization theory journals will
promote contributions aimed at critically examining its influence on social organization.
Self-declared critical journals failing to advance such a research agenda is of greater
concern. Therefore, writings on neoliberalism may initially appear in specialized
journals and, as discussions are settled in such quarters, may make it into the top-tier
journals. Under all conditions, a research agenda addressing the connections between
neoliberalism and managerial practice would make a more solid contribution to our
understanding of social organization.
Conclusion
The principal concern of critics of business school research has been that practitioners
are not benefitting enough from the time and effort plowed into management studies or
that the field has acquired comparatively little prestige in comparison with, for example,
economics. Relatively little interest has been shown in examining and theorizing the
wider social changes taking place in society. Todays institutional, political and
technological setting differs substantially from that of the 1950s and 1960s, and conspicuous
policy changes from welfare state bureaucratic organizations and professionalism to
market-based activities have been overlooked in the field of management studies. Business
school researchers should be less concerned about monitoring and guarding academic
prestige and more interested in securing its wider social relevance. This article, thus,
advocates that more systematic scholarly attention be paid to the neoliberalism
literature in the business school setting and, consequently, proposes an extensive
research agenda addressing the various intersections, co-dependencies and
co-evolutions of neoliberal economic and political policy writings and managerial
practice. Only by addressing the relevant social and economic issues will business
schools be able to secure their social relevance and, as a consequence, their position and
role within the university system. In addition, the literature on neoliberalism, today
dominated by sociologists and political scientists, would benefit from contributions by
business school researchers with the expertise and theoretical training to open up the
black boxes of managerial practice. A society dominated by neoliberal thinking is also a
society characterized by its managerial practices; overlooking the expertise needed to
manage market-based activities tends to mystify social action. Therefore, neoliberal
thinking and theorizing should be more explicitly addressed and scrutinized in business
school research.
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Corresponding author
Alexander Styhre can be contacted at: alexander.styhre@handels.gu.se
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The influence of neoliberalism

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of relevance-driven research but also to other stakeholders in society. Thus, the

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research tends to rely on relatively elementary theoretical frameworks), but in terms of

Wacquant (2009, pp. 306-307) continues by saying that neoliberalism is a transnational

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Encouraged by such theories of political economy, Thatcher declared war on

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As a consequence, Wall Street investment bankers regard themselves as heroic figures

A gradual loss of respect for traditional (i.e. non-financial) industries in combination

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increased emphasis on shareholder value creation. Recently, economic sociologists have

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