The Effects of World War II on U.S. Management Innovation

Productivity dramatically varies across firms and countries. For instance, within narrowly-defined US manufacturing industries, the most productive establishments make almost twice as much output with the same input as the least productive ones. Recently, economic research has shown that "soft" technologies, like management, are a key determinant of such outstanding productivity variations. While investing in management is crucial for stimulating both firm and aggregate growth, to what extent business school education affects managers' ability to improve firm performance and their career outcomes remains largely unknown. This project provides new empirical evidence on this topic, using evidence from one of the largest managerial education programs in history, sponsored by the U.S. government during World War II: the Engineering, Science, and Management War Training (ESMWT). The ESMWT provided free postgraduate education to engineers, scientists and managers employed at war industrial facilities. While engineers and scientists received a short training on war-related production, managers attended an MBA-style program, that offered a comprehensive business education. The program trained almost 1.8 million students, 25% of the university population in 1940. A distinctive feature of the ESMWT is that it prohibited any discrimination based on gender and race, and therefore gave women and nonwhite workers a unique opportunity to participate in graduate-level education. The large scale and scope of the ESMWT generate novel evidence on to what extent managerial education affects managers' labor market outcomes and if inclusive government programs may be effective in reducing gaps between demographic groups. Moreover, it sheds new light on the role of the U.S. government in shaping business education, as well as scientific human capital and innovation during and after World War II. Rich archival data on war facilities, manager career history, and professional networks are used to elucidate key mechanisms.

This research examines the effects of World War II on US managerial innovation, using evidence from the Engineering, Science, and Management War Training (ESMWT). Sponsored by the US government between 1940 and 1945, the ESMWT offered engineers and scientists employed at war facilities short training on war-related production; and middle managers and production supervisors a comprehensive business education via an MBA-style program. This project uses an unusually detailed newly-assembled dataset linking managers, engineers, and scientists that participated in the ESMWT, war facilities performance, and universities that hosted the program. Quasi-natural variation comes from the fact that workers had to score above an arbitrary threshold in an ESMWT entry-exam to be admitted. First, this project studies the effects of receiving business school education on the career outcomes of enrolled managers, relative to similar managers who scored right below the entry-exam threshold, and on the performance of war facilities in which they were employed. Moreover, it investigates whether professional networks formed during ESMWT contributed to shaping managers' labor market outcomes and if the program helped nonwhite and female managers to close the occupation gap with their white male colleagues. Second, this research analyzes whether the ESMWT caused structural changes in managerial education after the war. It exploits variation in university distance from war facilities, since only institutions within 50km of them could host ESMWT courses, and it relies on text analysis methods to compare changes in the MBA curricula between participating and nonparticipating institutions after the ESMWT. Third, this project studies if ESMWT classes offered to engineers and scientists shaped US scientific human capital and long-run innovation and its interaction with managerial capital. Given the large scale of the ESMWT, these results not only inform academics about the historical development of business school education in the US but could be helpful in designing similar educational programs under national emergencies.