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Building Blocks for Business
From the Bureau of Business Research to the Center for Research in Electronic Commerce, The Evolution of Business Research at the University of Texas at Austin
by Lois Shrout, Former Associate Director of the BBR, with Kate Johanns
Did Spurgeon Bell anticipate the far-reaching influence of business research at The University of Texas when he first campaigned for business training courses in 1914 and later proposed founding a research center in the School of Business? Even a foresighted leader such as Bell, first dean of the school, could probably not have predicted its bright future—a school that in 1999 would rank eighth overall in a nationwide study of research productivity, that currently supports more than 15 academic research centers, and whose great thinkers would help to design a technology-based revolution that would substantially change the state’s economics. Still, Bell worked tirelessly to persuade The University to support business research, emphasizing the potential benefit for Texas.
Given the impact of nearly 80 years of research success, it’s hard
to believe there was ever any debate over where such a research
facility should be housed and, in fact, whether one should exist at
all. But that certainly was the case. In 1922, when Bell first
proposed the creation of a bureau of business research similar to the
one he observed while earning his MBA at Harvard University, business
courses were still given scant respect at traditional liberal arts
universities. Some faculty considered them vocational classes that
were best left to commercial schools, and the idea of business
research was still quite foreign. However, in the pre-Crash,
pre-Depression economic boom of the early 1920s, the business
community needed skilled knowledge
workers—a product business schools could readily supply. Universities
might still have been suspicious of business courses, but the general
population welcomed them.
Bell knew UT’s business program could supply talented workers for the businesses that were growing in Texas—cotton farms and lumber mills, oil interests, accounting firms, and banks; he also knew research conducted at the school could help develop the Texas economy. Since his days as a UT student and time spent teaching at the University of Missouri, Bell had been interested in basic research, the creation of knowledge. Two of his associates at Missouri stoked this interest: Thorstein Veblen, author of The Theory of the Leisure Class and the concept of conspicuous consumption; and H.J. Davenport, pioneer of the loan fund theory of capital. However, Bell approached the Board of Regents with a proposal for support of applied research, not theoretical research. What he envisioned was a research arm that would use information to promote the industrial development of Texas and its natural resources, accumulate and publish useful economic information for Texas agribusinesses and industries, and tighten the bond between the University and the Texas business community.
Each year from 1922 to 1925, Bell submitted his plan for a business research center; each year, President Walter Splawn approved it; and each year, the University tabled it due to lack of funds. Bell became discouraged. It wasn’t until 1926 that the Board of Regents finally agreed to fund a business research bureau, albeit with a modest $1,000 annual budget. Even so, this was a great victory!
Unfortunately, Bell never enjoyed the fruits of his labor or had the opportunity to give shape to his idea: by the time the Regents finally passed down their decision, the frustrated Bell had already been lured away by Ohio State University to launch its research bureau.
Thus, the man who set in motion Texas’ tradition of business research excellence was not Bell but one A.B. Cox, a Texas-Ex with a master’s degree in economics who was an international authority on agricultural marketing. As director of the Bureau of Business Research (BBR), Cox’s first task was to mediate another round of debate on the business school’s role at the University. This time, the debate centered on the appropriateness of applied versus basic research. There was a growing rift between faculty in the Department of Economics, who favored research to pursue knowledge and discovery, and the Business School faculty, who increasingly embraced research of direct practical application to the Texas economy. In his 1962 history of the business school (Fifty Years of Education for Business at The University of Texas), C. Aubrey Smith elaborated on Cox’s early struggle with the BBR’s focus.
Smith wrote, “As much as Dr. Cox was interested in pure economic research, he finally resolved that the limited funds provided could be best utilized by following the route of applied research. He offered every available facility of the Bureau to the Economics Department faculty and sought their help and encouragement. Of the more than two hundred publications produced and distributed by the Bureau between 1926 and 1962, however, substantially all were authored by members of the staff of the Bureau and faculty of the School and College of Business Administration.”
Consequently, under Dr. Cox’s leadership, the BBR immediately became an important center for the compilation and analysis of data and the publication of analyses of the Texas economy. During the next 40 years, the BBR became the leading source of economic and business data for the entire Southwest. Bureau publications such as the Texas Business Review and the Directory of Texas Manufacturers started as simple newsletters and grew into products of great regional importance. For example, in 1929, the BBR published Dr. William J. Reilly’s market research, which would later become known as “Reilly’s Law of Retail Gravitation.” He introduced a formula similar to the law of gravity that uses distance and size as variables to predict the geographic point between two retail centers where a consumer would be more likely to choose one store over the other. The formula remains a cornerstone of retail marketing theory.
But by the late 1960s, as the University of Texas was growing into an institution of international prominence and the business school was becoming more prestigious with each passing year, the potential for business research was outgrowing the BBR. Improved transportation and communications technologies had removed geographic barriers to competition. Many firms began to do national rather than regional business, and state universities began to reduce their focus on regional issues and phase out research bureaus.
Thus market forces combined with the arrival of Dr. George Kozmetsky as dean in 1966 to usher in the next era of business research at the University of Texas. Kozmetsky, internationally renowned both for his innovative academic work in management education and as the co-founder of Fortune-500 company Teledyne, was a driving force for change in all aspects of the school, including its nascent research environment. Early on, he recruited prominent faculty members with distinguished research records. Some of his star recruits included Abraham Charnes, Eugene Konecci, and Albert Shapero in the field of management and William Cooper in accounting.
By the middle of the 1970s, Kozmetsky began to urge faculty to seek national publication for their research rather than relying on the BBR as their primary outlet. But perhaps Kozmetsky’s most lasting contribution to business research was IC2, or the Institute for Constructive Capitalism (today known as Innovation, Creativity & Capital), one of the Business School’s best known research centers. “Business is the economic synthesis of human knowledge,” Kozmetsky wrote at the time of its establishment. “The advancement of business knowledge is quite literally the growth of society. In this regard, business faculties occupy a unique position in the academic constellation. They have a special opportunity to integrate and synthesize research from diverse areas... If economic development is dependent on the birth of new knowledge, then the gestation should take place in business schools.”
Through IC2, Kozmetsky connected scholars nationwide and eventually worldwide in an effort to study how innovation leads to wealth creation and regional economic development. This center has become a model for linking economic and intellectual thinkers across the globe. It was Kozmetsky and the fellows and research staff at IC2 that began a series of studies revolving around his vision of the ‘ technopolis.’ And it was Kozmetsky and IC2 faculty who were enlisted in Austin’s collaborative effort to woo high-tech companies to the area in a deliberate attempt to turn the city into the international center for technology that it has become—an innovative community combining economic, intellectual, and political cultures.
But business school research didn’t stop with Kozmetsky’s efforts. Since his tenure, the McCombs School has become home to several leading research centers that give faculty and students opportunities to ask questions, test theories, and seek solutions to current business problems.
One such innovative research center is the EDS Financial Trading & Technology Center (FTTC), a unique facility developed through an alliance of technology and financial services firms that offers students the chance to be a part of Wall Street. Established in 1996, this state-of-the-art trading, research, and teaching center functions like a flight simulator. Students have access to the same financial data and information technology used on Wall Street, whether they are working on classroom exercises or managing The MBA Investment Fund, L.L.C., the nation’s first legally accredited, student-managed private investment fund. The FTTC has served as a model for similar centers in schools throughout the country.
Another research jewel within the school is the Center for Research in Electronic Commerce (CREC), which designs programs and methods to increase productivity and forecasts shifts in the cybereconomy. Prolific CREC researchers cover a broad range of subjects, from managing e-business transformation to defending the wireless infrastucture against attacks. They have also partnered with companies like Dell to track the productivity of the Internet.
The FTTC and the CREC are just two of McCombs’ many successful research centers—synthesizing both basic and applied research to benefit students, scholars, businesses, and entire industries. “To have good teaching in a business school, you must have good research,” current Dean George Gau asserts in his newly unveiled strategic plan for the school. “A strong research environment attracts the best faculty in business disciplines, faculty that are creating new ideas, challenging both undergraduate and graduate students intellectually, and developing cutting-edge curriculum.” To that end, Gau has committed additional support for research programs and centers that bring together faculty and firms to study and solve industry’s evolving challenges.
Spurgeon Bell would be well satisfied.
This article is part of a series of excerpts from the school’s ‘Heritage Project,’ a full-length work (yet to be published) celebrating eighty years of business education at The University of Texas at Austin.
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
