Journal of Market Focused Management, 2, 303–308 (1998)

c 1998 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.

°

The Importance of Basic, Applied Research

WILLIAM W. COOPER cooperw@mail.utexas.edu
Management Science and Information Systems Department, CBA 4.202, Graduate School of Business,
The University of Texas at Austin

LEIGH MCALISTER
Department of Marketing, CBA 7.202, Graduate School of Business, University of Texas, Austin, TX 78712

Received March 3, 1998; Accepted March 3, 1998

Abstract

Among many audiences there is a general sense that university business education is fail-
ing to meet the needs of the marketplace. Moore and Diamond (1996) suggest that the
pressure to respond to the marketplace has increased in recent years because of the low
entry barriers for new education vehicles, the high exit barriers for existing education in-
stitutions, and the proliferation of alternative ways to deliver university level education in
business.We illustrate this pressure by noting that non-conventional, distance learning ed-
ucational opportunities increased by 800% between 1993 and 1997. We suggest business
schools in research universities can compete effectively if we focus on research that is both
basic (influencing further knowledge development) and applied (problem driven), and if we
differentiate our offering by incorporating the findings of our basic, applied research into
our curriculum.
Keywords:

Introduction

Many people are uncomfortable with the ability of university education, in particular with
university business education, to meet the rapidly evolving needs of the marketplace. Take,
for example, the survey of INFORMS members reported in the June 1997 issue of OR/MS
Today. In that survey, 69% of the respondents indicated that they were not “satisfied with the
direction that operations research is going.” The level of dissatisfaction was 10 percentage
points higher among non-academics than among academics. Further, the group as a whole
is less optimistic and more impatient than it was five years ago.
More comprehensively, consider the 1995–96 AACSB Faculty Leadership Task Force
Report which took as its goals to (1) identify the issues and problems affecting faculty and
(2) outline alternative strategies and tactics to solve the problems. Figure 1 below (drawn
from their report) illustrates one of the problems that the Task Force identified: “Over time,
business practice has advanced rapidly. . . Although school and faculty competencies have
advanced, the gap between practice and academic research and teaching has widened.”1
304 COOPER AND MCALISTER

Figure 1. Growing gap between business and academia (from 1995–96 AACSB Faculty Leadership Task Force
Report).

Further, the Task Force Report suggests, “some faculty. . . rely too much on old meth-
ods and, lacking direct interaction with industry, generate little cutting-edge research that
makes a difference to industry.”2 Figure 2 shows research positioned on two dimensions:
“rigor/theoretical value” versus “relevance (payoff for industry)”. “Most research,” the Task
Force Report contends, “is high in theory and low in relevance. Some research is highly
relevant, but it often lacks strong theory and fails to meet tenure standards (sometimes this
is called ‘consulting’). What is needed is movement to the ideal area (I) where research
meets both theoretical and applied standards.” Further, the Task Force Report suggests that
“[f]aculty need to lead in converting research into the persistent core body of knowledge
that is imparted to students so they can improve the practice of business.”3
While the issues raised above may seem to be mentioned more frequently now than they
have been in the past, these issues are not new. Is there real change on the horizon or are we
victims of alarmist rhetoric? It is the contention of this paper that substantial new market
pressures are arising. Academia, like the health care industry and the auto industry before
them, will make fundamental changes in response to these market pressures.

Academic Market Pressures

Moore and Diamond (1996) summarize the academic market pressures as follows:

[T]here are relatively low entry barriers for new providers of business education
services and . . . there is an increasing array of substitute educational vehicles for
THE IMPORTANCE OF BASIC, APPLIED RESEARCH 305

Figure 2. Research tradeoffs and ideal positioning (from 1995–96 AACSB Faculty Leadership Task Force Report).

the traditional campus-based classroom setting. Additionally, there are high exit
barriers for existing business education programs. Although it is feasible to drop
specific programs and majors, it is uncommon to close a business school, whether
publicly or privately funded. So, while competition and substitutes whittle away at
the market shares of existing business education programs, the increasing bargaining
power of their customers and suppliers sustains the pressures to hold down prices
even in the face of rising costs. When we add to this formula the new demographics
of the college-going population, and the declining popularity of the business major,
we find many business schools faced with stagnation or even significant shrinkage
in enrollments. The result is excess capacity in current business programs and
intensive competition for student, employer and donor attention.
To make these pressures more concrete, consider the case of “cyberschools”4 (non-
conventional, distance learning educational opportunities). Begin by considering the fact
that university professors teach less than ever before (between 1970 and 1997, professor
time in the classroom decreased 50%). Further, between 1980 and 1997, the number of
college students increased 24% while the cost of college increased 300%. Perhaps we
should not be surprised that alternatives to conventional education have arisen. Between
1993 and 1997, the number of cyberschools increased by 800% (from 93 to 762).
To fully appreciate the nature of this competitive threat, consider the contrast between the
for profit cyberschool, University of Phoenix, and the more traditional academic institution,
Arizona State University. First, note that tuition at University of Phoenix ($237 per credit
hour) is roughly half that of Arizona State University ($486 per credit hour). Importantly,
306 COOPER AND MCALISTER

Figure 3. Cooper’s model of scientific research.

University of Phoenix has a much lower cost structure. Teachers at University of Phoenix
are paid approximately $2,000 per course while professors at Arizona State University are
paid approximately $67,000 per year.
To make the rapid growth rate of cyberschools more concrete, consider the case of Uni-
versity of Phoenix. Opened in 1976 with 8 students, the school went public in 1994 with its
stock priced at 2 1/2. by 1997 University of Phoenix had 40,000 students, 51 “campuses” in
13 states, $282 million in revenue and $30 million in income. The stock now trades at 31.
Clearly, students and capital markets alike find University of Phoenix’s value proposition
to be attractive.
Reflecting on the rise of such educational alternatives, business sage Peter Drucker says:
“Universities won’t survive.” Economist Milton Friedman suggests that, if universities
do survive, they will be significantly changed. According to Friedman: “There are many
activities that have very little to do with higher education—namely athletics and research.”

Basic, Applied Research: The Key to Survival

It is our hypothesis that research universities can survive. To survive, however, research
must be refocused. To understand the needed refocus, we turn to the model of Scientific
Research put forward by Cooper. Rather than focus on the trade-off between “rigor” and
“relevance”, Cooper considers the “research stimulus” and “generalizability of findings”.
In Figure 3 above, we present Cooper’s model. (Note that all cells in this model require
intellectual “rigor”).
THE IMPORTANCE OF BASIC, APPLIED RESEARCH 307

The columns in Figure 3 represent “research stimulus”. The first column, labeled “pure”
research, represents work which is theoretically motivated. The second column, labeled
“applied” research, represents work which is stimulated by a problem in the real world.
This research stimulus dimension is crossed, in the rows, with a “generalizability of
findings” dimension. The first row, labeled “basic” research, refers to that work which
influences further knowledge development. The second row, labeled “non-basic” research,
refers to work which does not influence further knowledge development.
Consider the following examples of research from each of the four cells that result from
crossing the two dimensions. Einstein’s General Theory of Relativity is an example of
basic, pure research. The motivation for Einstein’s work was theoretical, and that work has
certainly influenced subsequent knowledge development.
Pasteur’s Germ Theory of Disease is an example of basic, applied research. This theory
arose in a more indirect fashion than did the General Theory of Relativity. The Emperor of
France approached Pasteur with a problem: His silk worms were dying. Pasteur theorized
that disease was spread from humans to the silk worms by germs. Once the silks worms
were protected from human germs, the Emperor’s silk production was restored. Here we
have an example of research that was problem driven, the silk worms were dying. The result
of the research provided a solution to the problem, but it also proved to be generalizable
beyond the initial context. Germ Theory of Disease has certainly influenced subsequent
knowledge development.
Non-basic, pure research is theory driven but does not influence knowledge development.
The study of “magic squares” is an example of research from this cell. In this problem
the objective is to arrange a matrix of numbers so that the elements of each row, column
or diagonal sum to the same value. Research in this area has formulated certain general
principles but nothing much further than use in constructing more magic squares has resulted
from this research.
Non-basic, applied research has to do with solving a particular problem. Consulting pro-
vides an example of this work. Certainly, consulting is problem driven. Typically, however,
the results of a consulting study are specific to the particular problem situation studied. In
general, a consulting study will not influence subsequent knowledge development.
It is our contention that a focus on basic, applied research is the path most likely to lead
to survival for research-oriented business schools. (This contention is consistent with the
1995–96 AACSB Faculty Leadership Task Force Report’s call for research in the “ideal”
region depicted in Figure 2.) While it would certainly be acceptable to produce basic, pure
research; the 1995–96 AACSB Faculty Leadership Task Force Report can be interpreted as
telling us that attempts at basic, pure research have resulted in non-basic, pure research that
does not influence further knowledge development.
If research-oriented business schools continue to produce primarily non-basic, pure re-
search they are highly vulnerable to competition from non-research-oriented alternatives.
Equally dangerously, if research-oriented business schools switch their research focus to
(or slip into) non-basic, applied research (consulting), we contend that the vulnerability is
intensified. Consider the faculty at University of Phoenix. All have “master’s or doctoral
degrees; some do research and publish books and papers. . . most of the profs hold down
full-time jobs in the professions they teach, keeping them in touch with current issues and
308 COOPER AND MCALISTER

trends in their specialties.” (Gubernick and Ebeling, 1997: p. 89) If the basis of competition
shifts to consulting ability, research-oriented business schools will almost surely be unable
to compete with schools staffed by practitioners.
Given the potential danger associated with pursuing research strategies tied to any of the
other cells in the Cooper model, it seems clear that research-oriented business schools must
move quickly and decisively to focus on basic, applied research. Further, research-oriented
business schools must find mechanisms to drive basic, applied research into the curriculum.
If the research that we do does not change the material that we teach, and if the material that
we teach does not make our students differentially attractive in the marketplace; why should
research-oriented faculty salary be five times that paid to adjunct, or practitioner, faculty5 ?
Why should students opt to pay twice as much (or more) to attend business schools taught
by research-oriented faculty? Why should research-oriented universities survive?

Notes

1. 1995–96 AACSB Faculty Leadership Task Force Report, p. 1.

2. 1995–96 AACSB Faculty Leadership Task Force Report, p. 3.
3. 1995–96 AACSB Faculty Leadership Task Force Report, p. 4.
4. This discussion of cyberschools in this editorial is drawn from Gebernick and Ebeling (1997), “I got my degree
through E-mail,” Forbes, June 16, 1997.
5. Gubernick and Ebeling (1997) estimate teaching salaries and benefits to be $247 per credit hour for Arizona
State and to be $46 per credit hour for University of Phoenix.

References

American Assembly of Collegiate Schools of Business (1996), AACSB Faculty Leadership Task Force Report,
http://www.aacsb.edu/tf2.html.
Cooper, William W. (1974), “Understanding, Prediction and Control–and Other Matters for Scientific Research,”
SUPALUM, a publication of Carnegie Mellon University’s School of Urban & Public Affairs.
Gubernick, Lisa, and Ashlea Ebeling (1997), “I Got My Degree Through E-Mail,” Forbes, June 16, pp. 84–92.
Moore, M. R., and M. A. Diamond (1996), The Challenge of Change in Business Education, New York: Ernst &
Young Foundation.
OR/MS Today, “Survey of INFORMS Members,” June, 1997.

W. W. Cooper is Foster Parker Professor of Finance and Management (Emeritus) in the Graduate School of
Business and the Nadja Kozmetsky Scott Fellow in the IC2 Institute of the University of Texas at Austin. Author
or co-author of some 450 professional-scientific articles and 22 books, he holds honorary degrees from Ohio State
and Carnegie Mellon Universities in the U.S. and the University of Alicante in Spain. He also holds the John
von Neumann Theory Medal for outstanding contributions to Operations Research and Management Science, is a
Fellow of the Econometric Society and the American Association for the Advancement of Science and has been
elected to the Accounting Hall of Fame.

Leigh McAlister is the H. E. Hartfelder/The Southland Corporation Regents Chair for Effective Business Leader-
ship at The University of Texas at Austin. Professor McAlister’s research; focused on consumers’ variety seeking
behavior, consumers’ response to marketing actions, and the managerial implication of these behavior patterns;
has been published in leading marketing journals and has won awards from the Association of Consumer Research
and the American Marketing Association. Professor has been on the faculties of, and won teaching awards from,
The University of Washington, Massachusetts Institute of Technology, and The University of Texas at Austin.