The Singularity of the German Doctorate as a Signal for Managerial Talent: Causes, Consequences and Future Developments

Abstract

The paper focuses on signaling options for managerial talent under different higher education regimes. The educational paths in a sample of top managers of the 100 largest publicly traded companies in the U.S., France and Germany are consistent with our theoretical conjectures. For the singular role of the German doctorate, the traditional chair system in doctoral education and training is essential. The effects of higher education reforms are discussed. In Germany the doctorate is a powerful signal for managerial talent. Future signaling options are closely tied to German higher education reform. Key words: Doctoral Education, Signaling, Managerial Talent, German Higher Education, Higher Education Reform 1. Introduction Comparative international studies of top management careers routinely point to the unparalleled percentage of doctoral degree holders among German top managers (e.g. Hartmann 2000). Moreover, empirical studies devoted to the analysis of career perspectives among German university graduates report superior career opportunities for candidates holding a doctoral degree not only in universities and research institutes but also in public administration, politics and in the private sector. The German doctorate is highly valued among employers in various industries (Enders/Bornmann 2001; Baldauf 1998). These findings indicate that the traditional German doctoral education was not exclusively directed at the scientific labor market. Unlike the Ph.D. in the U.S. and the doctorates in many other countries, the German doctoral degree has obviously not been perceived by the labor market as a specialized indicator for research abilities in a certain scientific field. In order to serve as an 'accelerator' for a management career in business and public administration, the German doctoral degree must have been rather understood as an indicator for a more general form of human capital. For reasons of simplicity we will speak of 'managerial talent' when we refer to this kind of general human capital, which enhances the productivity of a candidate in many different employments. The interpretation of the traditional German doctorate as an indicator for managerial talent raises different puzzles: First, which economic mechanisms produce this singular property of the German doctorate as compared to doctoral degrees in other countries? Second, which economic mechanisms substitute for this property of the German doctorate in other countries and third, will this specific property of the German doctorate prevail considering the recent changes and reforms in German higher education? The general role of indicators for human capital has been extensively studied. Employers cannot assess the productivity of potential employees without cost. With time, employers may learn more about the workers' true productivity and subsequently modify the provided employment conditions. However, in many professional services and for higher job levels in general, the productivity of a worker may never become fully observable because labor output depends on multiple and complex exogenous variables. Consequently, employers frequently face a substantial risk of adverse selection in their employment decisions. The negative effects of information asymmetries between employees and employers are not only borne by the latter. Employees are equally concerned, since wages and career options reflect average qualities rather than the applicants' individual endowment. Individuals with an above-average talent have strong incentives to reduce information asymmetries and to actively communicate their superior potential. As Arrow (1973) pointed out higher education, among other things, may function as a filter in this context. Certifying that individuals have 'passed' through specific filter devices, educational credentials could serve as signals for certain aspects of human capital that employers may find valuable. …