Appetite for entrepreneurial activity among MBA graduates seems to be diminishing. This is according to the Financial Times (FT), in a survey it released on annual global ranking of business schools.
The number of MBA graduates starting a business as opposed to going into employment "peaked in 2015 when it reached 21 per cent. This was up from 18 per cent in 2013 and 2014. It fell back to 19 per cent in 2016 and 2017." the authors of the Financial Times article that reported these findings, Jonathan Moules and Laurent Ortmans, wonder whether "start-ups are on a downward trend or they will bounce back in 2018?"
Most successful companies were started by MBAs from top business schools. However, it is true that some of the most successful companies in the world were also started and are being run by people without an MBA. This not withstanding, the knowledge and expertise imparted in business school make life easier for entrepreneurs.
There are two reasons given as to why MBAs are no longer enticed by the dream of being their own boss. First, average salaries for MBA graduates have been on a constant upward trend. The expected median starting salary for recent MBA graduates in the United States in 2015 was $100,000 annually. This minimum was estimated to be well over $120,000 by September 2017.
Companies are willing to pay more to acquire MBAs. Graduates are therefore not eager to go through the rigors of setting up their own businesses. Someone moving into self-employment may have to sacrifice significant earnings in the short term. This, coupled with the fact that self-employment (or entrepreneurship) does not yield immediate financial rewards drives MBAs to seek employment.
Secondly, many companies are now encouraging corporate entrepreneurship. Large corporations are now pursuing product innovation the same way startups do. They are pushing employees to explore new products and technologies. This gives MBA graduates, employed in such companies, the freedom to exercise their entrepreneurial spirit without the risk of spending or losing their own money. In return, companies benefit when research and innovation leads to creation of new products or improvement of existing ones.
MBAs are therefore weighing the costs, of starting up their own businesses or companies, against the benefits. It seems the opportunity cost of being an entrepreneur is not worth paying at least in the short term
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| Photo by Muhammad Rizwan |
Most successful companies were started by MBAs from top business schools. However, it is true that some of the most successful companies in the world were also started and are being run by people without an MBA. This not withstanding, the knowledge and expertise imparted in business school make life easier for entrepreneurs.
There are two reasons given as to why MBAs are no longer enticed by the dream of being their own boss. First, average salaries for MBA graduates have been on a constant upward trend. The expected median starting salary for recent MBA graduates in the United States in 2015 was $100,000 annually. This minimum was estimated to be well over $120,000 by September 2017.
Companies are willing to pay more to acquire MBAs. Graduates are therefore not eager to go through the rigors of setting up their own businesses. Someone moving into self-employment may have to sacrifice significant earnings in the short term. This, coupled with the fact that self-employment (or entrepreneurship) does not yield immediate financial rewards drives MBAs to seek employment.
Secondly, many companies are now encouraging corporate entrepreneurship. Large corporations are now pursuing product innovation the same way startups do. They are pushing employees to explore new products and technologies. This gives MBA graduates, employed in such companies, the freedom to exercise their entrepreneurial spirit without the risk of spending or losing their own money. In return, companies benefit when research and innovation leads to creation of new products or improvement of existing ones.
MBAs are therefore weighing the costs, of starting up their own businesses or companies, against the benefits. It seems the opportunity cost of being an entrepreneur is not worth paying at least in the short term
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