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Negative Returns For MBAs With Focused Profiles In Investment Banking

The Specialist Discount: Negative Returns For MBAs With Focused Profiles In Investment Banking

Jennifer Merluzzi

Tulane University - A.B. Freeman School of Business

Damon J. Phillips

Columbia University – Columbia School of Business

February 2014


When is being specialized detrimental? Leveraging scholarship that links the sociological notion of identity to the advantages of labor market specialization, we provide arguments and evidence to understand when labor market specialization disadvantages job candidates. Specifically, we formulate three conditions under which specialization becomes disadvantageous, and then test this in a context that exemplifies these conditions: the market for graduating MBAs. Using rich data on two graduating cohorts in 2008 and 2009 from a top-tier U.S. business school graduate program, we show that “focused” MBA graduates with profiles of being specialists with respect to their activities prior to, during, and after matriculation, receive fewer job offers and earn lower starting bonus compensation than those graduates who did not focus. Specifically, our models show that candidates focused in investment banking were less than half as likely to receive multiple offers and earned over $20,000 less in starting bonus compensation than equivalent, but unfocused candidates entering the field. Our theory and findings contribute to the literature on market identities; with implications for the design of...