William Lazonick

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William Lazonick (born in Toronto, Canada, on June 8, 1945) is an economist who studies innovation and competition in the global economy. His research seeks to understand how, on the basis of innovative enterprise, a national economy can achieve stable and equitable economic growth. Lazonick is the originator of “the theory of innovative enterprise”, which, he argues, provides both an essential intellectual foundation for understanding economic performance and a fundamental critique of the neoclassical theory of the market economy. Much of his current work focuses on how the financialization of the U.S. industrial corporation, manifested in massive distributions of corporate cash to shareholders and the explosion of stock-based executive pay, results in employment instability and income inequity, while undermining the innovative capability of the U.S. economy. He also conducts cross-national comparative research on the social conditions that enable or proscribe innovative enterprise, focusing in particular on the economies of Britain, Japan, and China as well as the United States.

Higher Education[edit]

Lazonick was an undergraduate in Commerce and Finance at the University of Toronto, receiving a Bachelor of Commerce degree in 1968. He then attended the London School of Economics, where he was awarded a Master of Science (Economics) degree, with a Mark of Distinction, in 1969. Lazonick spent one year as a graduate student at the Graduate Institute of International Studies in Geneva before entering the PhD program in economics at Harvard University in 1970. At Harvard, Lazonick joined a large number of graduate students and faculty members who, as “radical economists”, were mounting a critique of the dominant neoclassical theory of the market economy. For his doctoral thesis, he studied the applicability of Karl Marx’s theory of capitalist development to the British Industrial Revolution, the experience that formed the empirical basis for Marx’s arguments.[1]



In 1975 Lazonick was hired as an assistant professor in the Harvard Economics Department,[3] where he taught comparative economic development, economic history, and the history of economic analysis, all from a perspective that was critical of neoclassical economics. In 1980 he was promoted to associate professor of economics. In 1982-83 he was a visiting professor of economics at the University of Toronto. In 1984-85 Lazonick held the Harvard-Newcomen Fellowship in Business History at Harvard Business School (HBS) and became an initial member of the HBS “Business History Group”, working with Alfred D. Chandler, Jr. He remained as a research fellow at HBS in 1985-86 with funding from the German Marshall Fund of the United States and the National Science Foundation.

Meanwhile, in 1985 Lazonick was appointed to a tenured professorship of economics at Barnard College of Columbia University. He was also a member of the Graduate Faculty of Columbia University, teaching a PhD course in economic history in the Columbia Economics Department and running a research seminar on national institutions and economic performance with Richard Nelson at the Columbia School of International and Public Affairs. In 1989-90, Lazonick was a visiting member in social sciences at the Institute for Advanced Study, Princeton, where Albert Hirschman was the resident economist. In 1990-91 Lazonick was president of the Business History Conference, the leading association of business historians in the United States. Also in 1991 he received an honorary doctorate from Uppsala University for his work on the theory and history of economic development. In 1992 he was a visiting professor of economics at Harvard University.

In 1993, after the publication of three books in the three previous years,[4] Lazonick made the unusual academic move of leaving a tenured position at an elite private university for a tenured position at a regional public institution, University of Massachusetts Lowell. The lure was the opportunity provided, under the administration of Chancellor William T. Hogan, to build an interdisciplinary graduate program in regional economic and social development at an engineering school that had deep historical roots in local industry and was now in the midst of a leading high-tech district, “Route 128”. Over the next 17 years at UMass Lowell, Lazonick participated in the construction of a world-class Master’s program in regional development, run by UMass Lowell’s Department of Regional Economic and Social Development (RESD), which he co-founded.

From 1996-2007 Lazonick was also on the faculty of INSEAD, the international business school in France, where he held an appointment as distinguished research professor. Additionally, he was a professor of economics at the University of Tokyo (1996-1997) and a visiting professor at the Norwegian School of Management BI (2002-2005). In recent years, he has also held visiting positions at the University of Bordeaux and the University of Toulouse.

Although RESD no longer exists,[5] Lazonick remains a professor at UMass Lowell, where he co-directs the Center for Industrial Competitiveness. Lazonick is also visiting professor at the University of Ljubljana, where he teaches a PhD course, The Theory of Innovative Enterprise, and at the Télécom Ecole de Management, Paris, where he engages in collaborative work on innovation and competition in the global communication technology industries.

In late 2010 Lazonick co-founded The Academic-Industry Research Network (theAIRnet), a 501(c)(3) non-profit enterprise, of which he was appointed president. theAIRnet evolved from a European Commission project on corporate governance, innovation, and economic performance that Lazonick ran at INSEAD in collaboration with Mary O’Sullivan (now a professor at the University of Geneva), and subsequent work on innovation and competition in the global communication technology industry with Marie Carpenter (Télécom Ecole de Management, Paris), Henrik Glimstedt (Stockholm School of Economics), and Edward March (formerly Lucent Technologies, now at Dartmouth College). According to its website, www.theAIRnet.org, theAIRnet is “devoted to the proposition that a sound understanding of the dynamics of industrial development requires collaboration between academic scholars and industry experts." The website adds: "We engage in up-to-date, in-depth, and incisive research and commentary on issues related to industrial innovation and economic development. Our goal is to understand the ways in which, through innovation, businesses and governments can contribute to equitable and stable economic growth – or what we call ‘sustainable prosperity’.”


Lazonick’s research has focused on the role of the innovative business enterprise in generating productivity and sharing these gains with employees as the foundation for stable and equitable economic growth. Ranging empirically from the British industrial revolution of the first half of the 19th century to the financialization of the U.S. economy in the early 21st century, Lazonick’s work has also included comparative perspectives on innovative enterprise and economic development in Japan and China.[6] Through the study of advanced and emerging economies at various stages of their development, his research has sought to construct a rigorous and relevant theory of economic growth that is grounded in the microeconomics of the innovative enterprise.

Lazonick has been a leading critic of the neoclassical theory of the market economy that dominates the thinking and teaching of academic economists. Whereas neoclassical economists see well-developed markets as causes of economic prosperity, Lazonick’s research shows that organizations that engage in collective and cumulative learning drive the process of economic development, with well-developed markets in land, labor, finance, and products as outcomes. Indeed, he argues that when these markets gain a preponderant influence in directing the allocation of resources in the economy, they undermine the organizations – family households, government agencies, and business enterprises – upon which we depend for the investments in productive capabilities that underpin stable and equitable economic growth. This perspective on the relation between organizations and markets in determining economic performance provides an analytical framework for formulating policies that support innovative enterprise and regulate hyperactive markets.

Lazonick’s work on the theory of innovative enterprise builds on the intellectual legacies of Karl Marx, Alfred Marshall, Joseph A. Schumpeter, Edith T. Penrose, and Alfred D. Chandler, Jr. In 2012, with David J. Teece, Lazonick edited the volume Management Innovation: Essays in the Spirit of Alfred D. Chandler, Jr. (Oxford University Press). Lazonick is co-organizer of the Edith Penrose Centenary Conference to be held at SOAS, University of London, on November 14–15, 2014.[7] Currently Lazonick is completing a book, The Theory of Innovative Enterprise, to be published by Oxford University Press, in which he lays out his theoretical framework and explains how, making use of it, business decision-makers can build innovative companies and government policy-makers can support prosperous economies.

Lazonick is now best known for his work on the financialization of the U.S. economy. He began this line of research in the late 1980s and became one of the first critics of the destructive ideology that companies should be run to maximize shareholder value.[8] In collaboration with Mary O’Sullivan, he continued this work in the 1990s at STEP Group, a research organization directed by Keith Smith in Oslo, Norway, and in the last half of the 1990s and early 2000s at INSEAD, where he directed the European Commission project Corporate Governance, Innovation, and Economic Performance.[9]

In the mid-2000s, with funding from the Upjohn Institute for Employment Research, Lazonick did an in-depth study of the transformation from innovation to financialization in the information-and-communication technology industries in the context of the rise to dominance in the United States of the “New Economy business model” emanating from Silicon Valley. His book Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute for Employment Research, 2009) won the 2010 Schumpeter Prize, awarded by the International Joseph A. Schumpeter Society. In this book, Lazonick shows how in the last decades of the 20th century New Economy companies used the speculative stock market to attract finance in the form of venture capital, which could realize returns through a quick IPO on NASDAQ. These New Economy companies also used the speculative stock market to attract labor partially compensated with stock options to engage in innovative product development. When they became profitable, these companies became obsessed with boosting their stock prices through massive stock repurchases. Meanwhile, led by IBM and Hewlett-Packard, Old Economy companies made the transition to the New Economy business model, but in the process severely compromised, and in some cases destroyed, their innovative capabilities.

Over the past decade, in the name of maximizing shareholder value, this financialized behavior, manifested by enormous stock buybacks and outsized executive pay, has become endemic to the U.S. economy. In an article, “Innovative Business Models and Varieties of Capitalism: Financialization of the U.S. Corporation,” that compares the United States and Japan, Lazonick shows how the persistence in the 1990s and 2000s of the Japanese institutions of stable shareholding, permanent employment, and main-bank lending, even in diminished form, imparted employment stability and income equity to the Japanese economy.[10] Although, in the United States, the New Economy business model has enabled rapid product development based on the technologies of the Internet revolution, Lazonick argues that financialization of the New Economy business model has undermined the innovative capability of U.S. industrial enterprises while contributing to employment instability and income inequity in the U.S. economy.

Over the past several years, with funding from the Ford Foundation (www.fiid.org) and the Institute for New Economic Thinking (http://ineteconomics.org/), Lazonick has elaborated his thesis that the financialized U.S. corporation is substantially responsible for employment instability and income inequity in the U.S. economy. He shows that since the 1980s, three structural changes in employment—one related to plant closings, the second to the end of the norm of a career with one company, and the last to offshoring of employment to low-wage nations—have eroded the availability of middle-class jobs in the U.S. economy. Initially these changes in employment were corporate reactions to changes in externally imposed industrial conditions. Subsequently, however, many major U.S. corporations have implemented these employment practices purely for financial gain. The increased profits have been distributed to shareholders as huge stock repurchases on top of generous dividend payments. Lazonick argues that U.S.-style stock-based compensation gives top corporate executives a vested interest in this financialized mode of corporate resource allocation. A full articulation of the thesis that pins poor economic performance on the financialized business enterprise can be found in three of Lazonick’s recent papers: “Taking Stock: How Executive Pay Results in an Unstable and Inequitable Economy,” Roosevelt Institute White Paper, June 5, 2014; “Labor in the Twenty-First Century: The Top 0.1 Percent and the Disappearing Middle Class,” in Christian Weller, ed., Financial Market Developments and Labor Relations, Labor and Employment Relations Association, forthcoming; and “Profits Without Prosperity: Stock Buybacks Manipulate the Market and Leave Most Americans Worse Off,” Harvard Business Review, September 2014 (published August 12, 2014).[11]


  1. ^ William Lazonick, Marxian Theory and the Development of the Labor Force in England, PhD dissertation, Harvard University, 1975.
  2. ^ Published biographical information on the first three decades of William Lazonick’s academic career can be found in Fred Carstensen, “William Lazonick,” in Warren J. Samuels, ed., American Economists of the Late Twentieth Century, Edward Elgar Publishing, pp. 159-173; and in an autobiographical essay, “William Lazonick,” in Roger Backhouse and Roger Middleton, eds., Exemplary Economists, Volume I, Edward Elgar Publishing, 2000, pp. 409-433.
  3. ^ “The Lazonick hiring,” Harvard Crimson, February 20, 1975, at http://www.thecrimson.com/article/1975/2/20/the-lazonick-hiring-pbtbhe-hiring-of/
  4. ^ William Lazonick, Competitive Advantage on the Shop Floor, Harvard University Press, 1990; William Lazonick, Business Organization and the Myth of the Market Economy, Cambridge University Press, 1991; William Lazonick, Organization and Technology in Capitalist Development, Edward Elgar Publishing, 1992 (in the series, Economists of the Twentieth Century).
  5. ^ For the demise of RESD, see www.restoreresd.org. In February 2014 the UMass Lowell administration froze admissions to the RESD program.
  6. ^ William Lazonick’s bio and CV can be found at http://www.theairnet.org/V2/people/lazonick.php.
  7. ^ http://www.soas.ac.uk/defims/research/
  8. ^ William Lazonick, “Financial Commitment and Economic Performance: Ownership and Control in the American Industrial Corporation,” Business and Economic History, second series, 17, 1988, pp. 115-128; William Lazonick, “Controlling the Market for Corporate Control: The Historical Significance of Managerial Capitalism,” Industrial and Corporate Change, 1, 3, 1992, pp. 445-488; William Lazonick, “Creating and Extracting Value: Corporate Investment Behavior and American Economic Performance,” in Michael Bernstein and David Adler, eds., Understanding American Economic Decline, Cambridge University Press, 1994, pp. 79-113.
  9. ^ See William Lazonick and Mary O’Sullivan, “Maximizing Shareholder Value: A New Ideology for Corporate Governance,” Economy and Society, 29, 1, 2000, pp. 13-35; William Lazonick and Mary O’Sullivan, Corporate Governance, Innovation, and Economic Performance in the EU: Final Report, co-authored with Mary O'Sullivan, Targeted Socio-Economic Research (TSER) Report to the European Commission (DGXII) under the Fourth Framework Programme, European Commission (Contract no.: SOE1-CT98-1114; Project no: 053), May 2002 (published by EU Socio-Economic Research of the European Commission, December 2004), at ftp://ftp.cordis.europa.eu/pub/citizens/docs/soe1-ct98-1114_21037cgep.pdf.
  10. ^ William Lazonick, “Innovative Business Models and Varieties of Capitalism: Financialization of the US Corporation,” Business History Review, 84, 4, 2010, pp. 675-702. This article received the Henrietta Larson Award from Harvard Business School for best article in Business History Review in 2010 (Lazonick had previously won the prize for best article in this journal in 1983).
  11. ^ Lazonick’s working papers are available at http://www.theairnet.org/