PUTTING BUSINESS RESEARCH TO PRACTICE

Written on the 12 October 2011

PUTTING BUSINESS RESEARCH TO PRACTICE

PROFESSOR Per Davidsson from the QUT Business School argues that we would see more successful private companies if they were to adopt research-based knowledge.

Imagine a world where doctors learned their profession early in life and then stopped caring about the science of medicine. For the remainder of their career they would instead rely exclusively on fading recollections of their education, their own experience and occasional discussions with colleagues.

While such doctors exist they are not necessarily the kind you would like to deliver the anaesthetic or to be holding the scalpel. Most doctors keep up with research of direct relevance to their work.

Not so with business and management. In business, some ‘doctors’ (managers) have never had formal, research-based training and most do not use research-based knowledge as an input into their decisions.

There are reasons for this. Many business practitioners get by pretty well most of the time without turning to research. By the way, much academic business research isn’t that great anyway, which is sadly true for most medical research and most business practice as well.

Further, the practitioner wrestles with immediate questions about firm, industry and situation specific problems to which the researcher – focusing on broadly generalisable ‘on average’ truths – cannot deliver complete answers.

Researchers are rightly pressured to convince academic peers that their conclusions are valid and to publish their findings in prestigious academic outlets. Regrettably, they are not much rewarded for asking the questions practitioners are interested in, or to make sure that their findings are put to use.

Practitioners, in their turn, lack the training to find and see the relevance in research that could contribute to better decision making. And sometimes they may even be arrogant enough to think they know all they need to know or that academe has nothing to offer.

But business research can be useful. Take the area of small firm growth. As this edition of Brisbane Business News illustrates, Queensland has many examples of small firms that have successfully grown larger – BMD Group, G James Group, The Coffee Club, Morris Corporation, Eagle Boys, Terry White Chemists to name a few. But we could arguably have more if research-based knowledge were put to better use.

Policy initiatives would do well starting from more realistic assumptions than that most firms have growth potential and that their owner-managers want to expand their firms. Research suggests many of them are reluctant to grow. This is often for good reasons.

Growth is frequently unprofitable and letting high profitability drive growth is usually sounder than is hoping that growth will make the firm flourish. While their concerns for loss of the ‘family’ atmosphere are valid, managers also refrain from growth due to unsubstantiated fears that growth would make their firms more vulnerable.

Media praise the fast-growing ‘gazelles’ and policy-makers rely on their job creation prowess. At the same time, research suggests that it is more meaningful to talk about ‘high firm growth’ as a temporary state than of ‘high growth firms’ as a particular species of firm. This is because few gazelles sustain their high growth over long periods of time. Moreover, very high rates of growth can be foolish rather than heroic.

In regards to job creation, policy-makers should realise that this is a consequence rather than a goal of successful firm growth and that much of the growth of gazelle firms is acquisition-based and thus represents job re-shuffling rather than addition of genuinely new jobs.

This said, research suggests that while mergers and acquisitions among large corporations may be over rated – often a sound economic outcome does not materialise – acquisitions may be an under-utilised growth strategy among small firm managers. While organic (internally generated) growth can be exhausting for small firms, leading to lower growth in the next period, there is indication that acquisitions can spark a new spurt of organic growth in the following period.

Putting research-based knowledge in business to better use requires academics who care about practice in the ways they source their research questions and disseminate their results. That’s our job. Realistically it also requires better ‘distribution channels’ – interested and competent journalists and consultants, well-organised web sites, research-trained employees, and other means that make research accessible to business and policy decision makers.

Putting research-based knowledge in business to better use also requires curious, reflective – and demanding – practitioners.

People who take their profession as serious as doctors do, such as ‘business doctors’ appreciate that easy and certain solutions to their problems are rarely to be found anywhere. They also realise that if they make an effort, research-based knowledge can enhance the firm, industry and situation-specific they already have.

That effort can never be provided by the researchers.


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