'Combining economics and business history'

How did you become involved with business history?
‘I first became involved in business history when I expressed my interest in the research of a former colleague at Tilburg University, Ailsa Röell, in 2001. Then at Princeton University, Ailsa was working on a paper on the history of Dutch corporate governance, but encountered difficulties in the collection of source material. I offered to help, which culminated in co-authoring the paper. Through this collaboration I found that a historical perspective contributes to a deeper understanding of current developments.’ ‘However, this endeavour in business history would have probably ended here, if not for an invitation from the business and economic history group at the Centre for History and Culture of the Utrecht University to talk about this paper. The Utrecht group was then, and still is, involved in coordinating a major research project on the history of business in the Netherlands in the twentieth century (BINT), for which it was commissioning a series of seven books. At that moment, BINT was still looking for authors for the last volume on corporate governance. I was asked to participate, together with Ailsa and Gerarda Westerhuis of Utrecht University. We proceeded to obtain funding from the Dutch Science Foundation and the project developed from there. The kind and open invitation extended to us by the Utrecht University proved to be a pivotal moment in the development of my research interests. Since then, many papers have branched off the BINT project and I can safely say that it really opened up a whole new area of research opportunities for me.’

How would you describe your approach to business history?
‘From the cooperation with Ailsa and Gerarda, the collaboration on the BINT project and attending several business history conferences, I learned that combining history and economics yields research that contains both the detail and deep understanding of history and the theoretical and methodological rigour of economics. That is to say, business history is often aimed at finding the historical uniqueness of a business case, whereas economists generally aim at theory building and testing, based on recent data. Combining both, in my opinion, allows research that incorporates the strengths of both fields. From this insight, I developed a set of future challenges for research on corporate governance, which I included in my inaugural address on the irrational and rational managers and corporate governance when I was appointed professor of finance in 2006.’

Could you elaborate?
‘In short, my argument was as follows. Economists assume that managers always strive rationally toward optimisation of a company’s value. However, research has shown many times that managers are prone to irrational decision-making, often guided by past decisions – such as measures to protect a company from take-overs – instead of rational optimisation. The governance structures of today are the result of these path dependent historical peculiarities that are well understood by business historians but are insufficiently appreciated by economists. Incorporating the insights of business history yields to a better understanding of variations in corporate governance in time and space.’

How does this influence your current work?
‘For instance, I’m currently working on a paper that takes a new approach on the influence of big linkers on business performance, together with Ailsa and Gerarda. Based on a large dataset of companies and their executive and non-executive directors we aim to estimate the influence of these directors on a set of performance indicators for the businesses they’re affiliated with. From this we construct a ranking of the most influential people and select from these the big linkers. For these big linkers we then write short biographies to delve into their personal histories in the Dutch business community between 1957 and 2006. By doing so, we aim to find a more objective method of identifying the truly influential big linkers, instead of relying on reputation or media attention. I think this demonstrates how we can combine the strengths of methodology in business studies and business history to reveal both general patterns and detailed historical insights.’

Abe de Jong (1970) is Professor in Corporate Finance and Corporate Governance at Rotterdam School of Management, Erasmus University. He obtained his PhD in finance at Tilburg University in 1999 and started working as lecturer and researcher at Erasmus University in 2001. In 2006 Abe was appointed professor at the department of finance.