Are security analysts
fashion victims?
EXECUTIVE SUMMARY
Ann-Christine Schulz and Alexander T Nicolai
argue that analysts simply follow – and even set –
• The capital market often dictates
companies’ behaviour.
management fashions, because that is what the
• The infl uence of analysts is evident
market demands, but it can be detrimental to
in management decisions.
businesses and corporate strategy
BY: ANN-CHRISTINE SCHULZ; ALEXANDER T NICOLAI
his paper discusses the provocative research direction has put particular time. A typical fashion in
T
infl uence of the capital forward the notion of management the 1990s was the core competence
market on management fashion as an explanatory model. discourse which claimed that
fashions and uses the core Management fashions can be companies should develop strategy
competence discourse as a case study understood as transitory collective and structure around their ‘core
and analyses whether security analysts beliefs which are disseminated by business’. In the course of this
swing with the fashion cycle or serve as business consultancies, management discussion many companies refocused
a corrective, which secures the gurus or business schools and promise their business by means of de-
rationality of managerial actions. Using quantum leaps of effi ciency. Lean diversifi cation. Bibliographic data
US fi rm data from 1990 to 2002 we Production (LP), Business Process show that the fashion discourse had
show that analysts systematically Reengineering (BPR) and Total passed the zenith of its popularity by
overestimated earnings of refocusing Quality Management (TQM) are the end of the 1990s.
fi rms in the 1990s. We also present well-known examples of such fashions. In recent years the discourse of
evidence that their valuations are Th ese concepts typically follow a managerial practice has been shaped
infl uenced by the core competence lifecycle which is characterised by a primarily by the ‘packaged solutions’ of
discourse and show a systematic bias short-lived, bell-shaped popularity management consultancies. Th e role the
and our results suggest that analysts are curve. Th eir diff usion depends not capital market plays in the fortunes of
facilitators – or even originators – of only on the promised enhanced management fashions, however, is
management fashions. performance but also on socio- seldom considered, although there is
psychological forces, imitative general agreement that over the past few
MANAGEMENT FASHIONS behaviour or signalling to appear decades the capital market’s infl uence on
How organisational forms and modern and progressive. organisational forms and managerial
practices spread is a central, recurring Management fashion defi nes what practices has grown. Fund managers,
topic of organisation theory. One is regarded as the ‘right’ approach at a rating agencies, investment banks and
22 WINTER 2008/09
22-24 fashion victims.indd 22 27/11/08 16:39:53
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