A VC in Vacationland

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I have lots of younger, entrepreneurially-inclined friends who ask me if spending perhaps $300K (including foregone income) to get a degree from a top business school is worth the time and energy.  I generally tell them that "it all depends".  If you want to be an billionaire entrepreneur, you might be better dropping out of Harvard–witness Bill Gates and Mark Zuckerberg. But seriously, does the MBA from Harvard instill some magic sauce in your brain that will allow you to perform better than others?  Evidently not at the CEO level, according to a new study by the University of New Hampshire.

According to Massachusetts Hi-Tech, the study, titled “CEO Education, CEO Turnover, and Firm Performance,” analyzed data from the largest 1,500 U.S. firms and used U.S. News & World Report’s 2008 rankings of national universities to determine the top-20 tier of schools when comparing the education data of CEOs.

Brian Bolton, assistant professor of finance at the University of New Hampshire’s Whittemore School of Business and Economics, conducted the research using data from the years 1993 through 2007. Bolton found that CEO education played a significant role in the hiring process of a new CEO, even though he observed no strong correlation between the quality of a CEO’s MBA education and the company’s long-term performance. He said that those companies performed no better than companies led by a CEO with any other type of education, MBA or not. He noted that an MBA degree may give a slight advantage early on. According to the report, companies may initially experience some growth following the hire of a CEO with an MBA, both top-tier and average, after firing the previous CEO but those improvements in operating performance were generally short-lived and the correlation does not apply to all firms in general.

So, what's the answer? Still, it depends.  If you want a career in certain businesses like finance and banking, the MBA is very useful.  If you want to be an entrepreneur, get going on developing your innovative start up earlier rather than later.