By: Dr. Fred McKinney Posted: May 16th, 2017

We rely on the support of corporations, Minority Business Program (MBP) alumni and others. Minority business executive education is an investment that requires the support of recipients and others. Corporations, alumni, government and others have supported the work we do at Tuck since the beginning of Minority Business Program. We are fortunate to have a growing number of supporters of our programs, and the reality is we need even more support to continue to provide the highest quality executive education for diverse entrepreneurs in the world.

The reason why corporations should support our efforts is that MBP can and does improve the performance of our participants. Management matters. Leadership matters. Strategy matters. These and other business tools are sharpened at Tuck MBP. The benefits accrue to the participant, their employees, their communities, and importantly – to the corporate community who support this effort.

Economists have a concept called externalities that helps explain the challenges we face in minority business development in general and executive education, specifically. Executive Education of the type we provide at Tuck MBP is an excellent example of an externality. An externality is defined as occurring when the actions of one person/organization/company provide a benefit to another person/organization/company and the beneficiary does not compensate the provider of the benefit. Interestingly, economists consider externalities as an example of market failure.

The reason why this and other externalities are considered market failures is that market forces alone will not produce enough of the benefit that is the source of the externality. In this case, executive education of minority entrepreneurs will be under-produced despite the value received by corporations and recipients. Additionally, the value that is produced and supported by some corporations create free riders of other non-supportive corporations.

There are only a limited number of ways to deal with the free rider problem. One is public support for what is arguably a “public” good. But we all know that public financing of minority business education is a tough (not impossible) sale. Another possible solution would be to ask corporate beneficiaries to contribute who do not currently support this work. The problem here is also the reason there is a problem in the first place – it is difficult if not impossible to identify who are the specific beneficiaries. For example, Wells Fargo provides support for diverse businesses who attend our program. Some of these suppliers might also benefit other financial service companies. Which specific financial service companies benefit, and how much do they benefit from the improved quality of MBP alumni? The fact of the matter is these corporate free riders, notice I am not pejoratively calling them free loaders, may not even be aware of the benefit they are receiving or the source of that benefit. (A free loader would be aware of the benefit and would take active measures to avoid paying for the service received.)

The other solution is to communicate with corporate beneficiaries that they should support executive education for diverse businesses even if the that support benefits other corporations because ultimately, we are all better off.

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