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What Wall Street Wants – Exploring the Role of Security Analysts in the Evolution and Spread of Management Concepts

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  • Alexander T. Nicolai
  • Ann‐Christine Schulz
  • Thomas W. Thomas

Abstract

This paper discusses the role of security analysts in the dissemination of popular management concepts, drawing on neo‐institutional and management fashion theory. Focusing on the core competence concept, we investigate whether security analysts swing with the popularity of a management concept or serve as a corrective that secures the rationality of managerial actions. Through our analysis, which uses data for US‐based firms spanning the period 1990–2002, we show that during the 1990s analysts systematically overvalued the future earnings of refocusing firms that incorporated principles derived from the core competence concept. Moreover, we present evidence that their valuations were positively influenced by the popularity of the core competence discourse and exhibited a systematic bias. Our results suggest a more nuanced understanding of the dynamics underlying the popularization processes of management concepts. In addition to the classical bandwagon‐effects discussed in neo‐institutional theory, we argue that the mediating role of security analysts and their impact on stock‐market prices promote the diffusion of new management concepts.

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  • Alexander T. Nicolai & Ann‐Christine Schulz & Thomas W. Thomas, 2010. "What Wall Street Wants – Exploring the Role of Security Analysts in the Evolution and Spread of Management Concepts," Journal of Management Studies, Wiley Blackwell, vol. 47(1), pages 162-189, January.
    • Handle: RePEc:bla:jomstd:v:47:y:2010:i:1:p:162-189
    DOI: 10.1111/j.1467-6486.2009.00862.x
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