Merluzzi & Phillips (2016). The Specialist Discount: Negative Returns for MBAs with Focused Profiles in Investment Banking.

Jennifer Merluzzi – Tulane University
Damon J. Phillips – Columbia University

Daniel Newton – Arizona State University
Insiya Hussain – University of Maryland

Article link:

Question 1. Genesis of the Idea. This is a wonderful article that turns on its head the idea that career specialization yields greater rewards to the individual. Specifically, you show that MBA graduates with the most focused profiles in investment banking were less likely to receive multiple i-banking job offers, and were offered less in initial bonus compensation relative to those with either no, or less-focused, exposure to the industry. What inspired this research? Specifically, what prompted you to “consider the opposite” when it comes to career returns for specialists versus generalists?

Thank you very much. It is an honor to have the opportunity to talk about our article. We first became interested in this topic a few years back. Theoretically, we were interested in how the categorical imperative and advantages of a “robust identity” translated into assessments of individuals who were candidates for long-term employment. Namely, we were suspicious as to whether the positive audience reaction to a movie, restaurant, or book with a clear identity would apply in the same way toward assessments of individuals as job candidates for longer term employment. Our suspicions were especially strong in the case where firms were spending considerable resources (time, money) to recruit these individuals since in these cases, the signaling value of being a specialist should be diminished. At the same time, research in this area was starting to qualify when an individual’s clear identity may not garner the same rewards (e.g., Leung’s (2014) work on freelance IT workers being not erratic but also not too specialized). When you read Zuckerman et al.’s (2003) paper on robust identities, they also observe that while specialization helped actors early on in their careers, it became detrimental to actors later in their careers who benefited from demonstrating skills across diverse acting roles. At the same time, the empirical settings for past work typically involved short-term, project-based employment. It was not clear to us that these findings applied to the context of hiring for longer-term employment. This drove us to start thinking more about the conditions under which we would expect specialization to produce the opposite effect and be more of a disadvantage – and whether the market for MBAs met those conditions.

This theoretical focus connected to a tension we observed with respect to the early careers of the MBA students we taught. On the one hand we observed a strong normative pressure for MBA students to conform in order to establish a clear identity as “a marketing person” or a “finance guy”. This pressure often led to students herding into clear functional specializations. Indeed, some MBA programs began to establish functional tracks for their students and business programs have begun to offer one-year Masters degrees in technical areas. This was further echoed in career blogs and advice coming from these career sites. Indeed, one could see how this perspective might be consistent with the emphasis on specialism in the academic literature.

Yet, when we looked at the labor market and talked to employers something very different was being emphasized. For example, a top banker on Wall Street told us that he would much rather hire the individual with accomplishments in many areas – even unrelated areas from finance such as a concert violinist or, in athletics – before hiring the student who focused all his or her activities and interests more singularly in finance. And so the gap in the literature alongside a tension in the advice to job candidates motivated us to seriously “consider the opposite”.

Question 2. Commoditization and “What Firms Want.” You touch upon the idea of “commoditization,” saying that in labor markets where specialists are relatively common, an individual specialist may be seen as one of many, and thus relatively less valued by hiring organizations. This reminds us a bit of Marilyn Brewer’s optimal distinctiveness theory, which talks about how individuals seek to be different (but not too different) from those around them. Here, it appears the organization is valuing optimal distinctiveness in candidates. Can you tell us about the rationale for this from the organization’s perspective? Do you view this as a smart hiring strategy or a “cognitive bias” that leads organizations to neglect otherwise highly competent specialists in their talent pool?

We did not specifically consider Brewer’s optimal distinctiveness theory in developing the thesis for this paper or test cognitive bias directly in our analysis. Instead, our rationale comes from the basic economics of supply and demand in the labor market. If a firm is hiring from a large supply of homogeneous candidates in the market, then they have more bargaining power in that relationship and arguably, can hire those candidates with that more common background for less money. With the focus on specialization in MBA programs, what emerges is many “finance candidates” or “marketing specialists” – making the supply of specialists common and essentially commodifying the candidate.

When you look at where specialization has been deemed beneficial in past research, there is an implicit assumption that specialization is difficult to establish and thus rare. However, among MBAs, we found that the emphasis is on focus and specialization and so, the pool of candidates is more likely to be specialized than not. This provides employers a larger pool of homogeneous candidates.

This also suggests that firms are more likely to have hired specialists in the past, given that the supply of labor emerging from these programs is more likely specialized. This further allows employers to more easily “relatively compare” (cf. Bidwell 2011; Bowers 2013) the value of a specialist because they have experience with specialized employees already in their firm. This increases employers’ awareness of the minimum incentives they need to offer to attract that specialist candidate – again favoring the employer.

With this said, we do see our theory consistent with optimal distinctiveness theory particularly in regards to our third condition, but also somewhat the other two. To the extent that being specialized is rare and hard to do versus more common and homogenous is akin to Brewer’s theorizing on the downsides of an identity being too distinctive or, too assimilated. Being too distinctive in our context would be closer to Leung’s (2014) specification of erraticism – where the set of activities and experiences comprising one’s profile/identity is so widely varied that it is difficult to make sense of, whereas being too assimilated is what we argue is the result of the focused, specialized candidate – it is not distinctive enough to be competitive on the labor market. A key difference we see in our theory and context from Brewer’s theory is that among MBA candidates, there is signaling value associated with these choices of investing one’s time that is related to quality but also an indication of effort. It is seen as more difficult to accomplish across areas than remain on a linear trajectory and as a result, less competition exists among those who are able to do this. This differs from Brewer’s theory that is focused on individual identity from in/out-group membership and demonstrating assimilation and distinctiveness from this membership. These MBA candidates are all already in the “in group” – it is then about differentiating enough to gain a competitive advantage in the labor market within that group.

Beyond this, individuals with diverse set of more generalized skills are generally thought to be more re-deployable resources once inside a firm (Kuhnen & Oyer 2012), giving the firm more slack to move these individuals to areas within the firm that need attention compared to specialists. This can increase their value to employers compared with specialists who were seen as less flexible.

Question 3. Generalizability. Would you expect your effects to hold with students at lower-ranked schools? Perhaps students at these schools would benefit from specializing in i-banking because the number of positions available to them and their classmates is much less. And more broadly, do you think the specialist discount applies more to certain occupations than others?

This is a very interesting question and one that we have thought about quite a bit in doing this research. Our theory predicts that the specialist discount will occur when three labor market conditions are in place: (1) the market has strong, reliable institutionalized indicators of quality; (2) the candidate agentically constructs the set of experiences presented to the market; and (3) the supply of specialists is large or, more common compared to generalists. When these conditions are in place – as they are in the hiring of top-tier MBA students where we tested our theory – a specialist discount emerges.

With this said, it is possible that lower-ranked schools may benefit from producing specialists if these conditions are not met in these labor markets. So for instance, condition one is met in elite schools because of the rigor of admissions processes that individuals must hurdle before even entering the program coupled with the strong instruction once inside the program. If you know less than 5% of the applicants get admitted to a program, an employer has a pretty strong indicator of quality in hiring an individual from that school. Of course, this may not be met in lower ranked schools where there are not the same admission criteria or reputation for tough academics that would produce robust signals of quality onto graduates of those programs. The same logic can be applied to condition two or condition three when comparing elite versus lower ranked schools as well.

This is not to say that it is not possible that graduates of lower ranked schools may also face the specialist discount. For instance, even if the program is ranked lower globally, in the local labor market it still may carry a strong reputation, which produces a strong signal of quality for employing firms in those markets. Additionally, it may be the case that students in these programs are even motivated to construct resumes filled with experiences and activities to demonstrate their investments since they cannot rely on the ranking of their program. And, it could also be likely that lower-ranked schools may have fewer curriculum options due to smaller faculties or, resources to dedicate to diverse electives, making the likelihood of standard functional concentrations – or emphasis on producing graduates along one or two functional areas of expertise to differentiate their program – an even more likely outcome for lower-ranked schools – thus, increasing the number of specialists emerging from these programs into the market. So, although we tested our theory in the market for elite MBAs precisely because it exemplifies a labor market with the three conditions, it is possible that the specialist discount could emerge in other markets, such as from a lower-ranked program, and a topic worth exploring further.

Regarding occupations, we found initial evidence of a specialist discount for those who focused in marketing or corporate finance in the context we studied. Again, thinking about the three labor market conditions, it really depends on the program rather than the occupations. So, in our context, it was more unusual to specialize in non-profit management, or human resources, and so, we would not expect specialization in these occupations to be discounted as long as the other two conditions were also met (e.g., the signal for quality is still strong for these graduates and their experiences are interpreted as direct investments). Likewise, it is possible that a program that produces few investment bankers may also produce candidates specializing in investment banking that are not penalized (again as long as the other two conditions are met).

Question 4. Practical Implications. Given your research, and the ever-present frenzy around recruiting for competitive jobs such as in investment banking, how would you advise young workers to manage the “direct investments” they make in a particularly industry? Moreover, what kind of recommendations would you give business school leaders or MBA admission directors who deal in this space? Would they do well to remove specialist distinctions?

What we discovered through our investigation is that the MBA has value as a generalist business degree. It is indeed different than an MD or a JD degree where the expectation is that graduates emerge trained to operate or, has the skills to work in a distinct specialized field of medicine or law. The beauty of the MBA is the generalist business training that individuals receive across a variety of functions from management to accounting to finance to operations.

There is of course benefit to offering concentrations in areas for individuals who express an interest or, wish to improve their skill set in an area. Indeed, individuals without any business training – or with one focused functional training – before entering the program could greatly benefit from gaining skills and experience in a different concentration during the MBA program. However, what our research shows is that one needs to consider not what happens inside the program but also what that individual brings to the program in terms of prior experience and where the individual plans to go upon graduation – it is not about one point of specialization during the program that leads to a penalty, but rather that individuals choose to continue along a singular, focused trajectory before, during and after the program – that is of importance. What we found is that the market devalues the choice to use time in the MBA gaining additional skills and experiences in the same area that one already has skills and experiences in – especially when that individual plans to continue working in that area upon graduation. It’s the singular focus that was penalized. The real value of the MBA is broadening one’s exposure to related areas of business and, demonstrating competency and accomplishment across these areas.

What this suggests to business school administrators is that it is important to consider ways to preserve this ability to offer concentrations while also ensuring an overall generalist business education is achieved when they design programs and requirements in the MBA space. It also speaks to advice given to students in a program on where to spend one’s time in extra-curricular activities and even advising students who are trying to decide across a few possible career trajectories to use the internship period to try something different rather than worry about demonstrating a consistent focus or specialization. Right now, with a tighter labor market, it creates a sort of fear that not demonstrating total commitment and focus will somehow penalize students. This can motivate students to begin an arms race to collect and demonstrate more and more resume items in one singular area rather than taking full advantage of the diverse experiences and training the MBA program and degree really has to offer. Administrators of the program should make sure to create degree requirements to ensure students really get exposed to a wider set of business training before graduating.

Question 5. Careers in the Management Field. Thinking about the management field, PhD students are strongly pushed towards becoming specialists early in their career by creating a coherent research stream or crafting a research identity. Do you think there’s a specialist discount for organizational scholars as well?

That is a great question. Our research focuses on the point of hire and what employers value more in making offers to graduating MBAs. Once inside firms, it is possible that MBAs who specialize may do better in terms of faster promotions especially within a single track inside a firm. However, it is also possible that the same reasons that led firms to offer more money and job offers to candidates with more generalist profiles – re-deployable, more flexible work force, harder profiles to find – prevail in evaluations of these employees once inside the firm as well. There is also evidence of an association between more generalist skills and advancement in a firm — CEOs with generalist skills and experiences are compensated more than specialized ones (Custodio et al. 2013). We are currently tracing this in our data, following these individuals’ careers to better understand this in terms of subsequent career mobility of individuals with more or less focus.

In terms of doctoral students, there is certainly a similar pressure to specialize in terms of research. Our theory would predict that research specialization would be discounted if the three conditions are met: (1) the students come from a program that has a strong signal of quality associated with it (due to professors, the school reputation, etc.) that endorses the student’s capability as a quality researcher regardless of their specific research identity per se; (2) student’s research is perceived as a reflection of their own investment in these choices to develop this research – as opposed to being given to them as part of some sort of assigned aspect of their doctoral program (e.g., all students get an assigned mentor and guaranteed a paper by graduation with this professor vs. the student worked with many professors by their own volition without this mentorship structure); and, (3) having a strong specialized research program on a resume in an area is common amongst doctoral students, giving schools many students to choose from in a particular research specialty compared to a labor market where a sub-set of schools are uniquely trying to hire for a specific researcher – e.g., an economic sociologist who researches social movements – and there are few students known for this in the market.

Now, what is somewhat different about market for doctoral students compared to that of elite MBA graduates that we studied is that there are these different sub-markets within it where, for example, some departments optimize on hiring “the best athlete” and other departments optimize on hiring a “type” (i.e., the best third-baseman out there). Some departments even shift between these hiring motivations year to year, while others consistently look for specialized candidates or look for those with very broad research streams. Moreover, to the extent that inter-disciplinary research becomes valued, specialists would also be discounted and generalists favored. So it may be the case that the academic market is a series of sub-markets rather than one labor market. In that case, however, the motivations of a sub-market can be placed against the three labor market conditions to make a prediction about the value that particular academic sub-market places on specialist doctoral students.



Bidwell, M.2011 ‘‘Paying more to get less: The effects of external hiring versus internal mobility.’’ Administrative Science Quarterly, 56: 369–407.

Bowers, A. 2013 ‘‘Relative comparison and category membership: The case of equity analysts.’’ Working paper, University of Toronto, Rotman School of Management.

Custodio, C., M. A. Ferreira, and P. Matos. 2013 ‘‘Generalists versus specialists: Lifetime work experience and chief executive officer pay.’’ Journal of Financial Economics, 108: 471–492.

Kuhnen, C. M., and P. Oyer. 2012 ‘‘Exploration for human capital: Theory and evidence from the MBA labor market.’’ Munich Personal RePEc Archive Paper No. 39411.

Leung, M. D. 2014 ‘‘Dilettante or renaissance person? How the order of job experiences affects hiring in an external labor market.’’ American Sociological Review, 19: 136–158.


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