Why business schools do so much research: A signaling explanation

Criticism is mounting on business schools for their excessive focus on research and the relative neglect of teaching quality. This paper shows that if students have imperfect information about teaching quality and if business schools differ in their research productivity, the least productive schools would do as much research as the top-tier ones only to manipulate students’ expectations. In turn, the most productive schools might resort to excess research in order to signal their type in the eyes of prospective students. Since resources are limited, they also tend to neglect teaching quality. Such a situation is socially inefficient as compared to the perfect information case.