Which Theories Do Markets Perform? Market Response to Shareholder Value Innovations
Frank Dobbin, Professor of Sociology, Harvard University, Cambridge/MA
Since the 1980s, America’s largest firms have embraced innovations advocated by agency theorists in economics.
These were expected to improve financial performance and attract investors. This episode gives us the opportunity to test
a theory of why certain economic theories become self-fulfilling, causing market participants to perform them by rendering
their predictions true. It also gives us the opportunity to explore the origins of many of the strategic innovations that
contributed to the economic crises of the 21st century.
Frank Dobbin is Professor of Sociology at Harvard.
An organizational and economic sociologist, he has studied how early corporations invented new business strategies following regulatory shifts;
how firms devised anti-discrimination programs in response to Civil Rights law (and the efficacy of those programs); how political systems shaped nations’
ideas about industrial rationality; and how public policies and financial market actors shaped the shareholder value practices that leading firms now embrace.