For decades, the fundamental assumptions underpinning business theory have emphasized performance metrics predominantly at the expense of societal progress. This traditional focus has prioritized measurable outputs like profit maximization and shareholder returns, relegating concerns such as fairness, sustainability, and overall wellbeing to the periphery. A transformative new volume, Core Assumptions in Business Theory: A Wedge Between Performance & Progress, edited by Subramanian Rangan, Professor of Strategy and Management at INSEAD, challenges this entrenched paradigm. This work critically examines the often overlooked foundational premises of business disciplines and seeks to reconcile the ingrained tensions between economic performance and societal advancements.
The book gathers an impressive array of insights from leading social scientists, economists, philosophers, and management scholars. These experts delve into the implicit assumptions embedded within disciplines ranging from economics and strategy to marketing, leadership, and operations. By interrogating these core premises, the contributors expose how outdated theoretical frameworks divide business outcomes from wider societal wellbeing, creating systemic fractures that hinder sustainable progress. The volume highlights that this division is not accidental but rooted in legacy models that often abstract human and social factors out of the economic equation.
At the heart of this critical re-examination is a proposal to synthesize performance and progress by recalibrating the objectives and rationalities that guide business decisions. One of the innovative concepts introduced is a revised profit function that explicitly incorporates harm—recognizing that traditional measures of profit fail to account for social and environmental externalities. Similarly, the editors advocate for adopting a two-stage rationality framework, which melds conventional economic rationality with considerations of wellbeing and moral reasoning. This nuanced approach challenges the prevailing notion that economic actors are purely self-interested profit maximizers, promoting instead a more holistic understanding of human motivations within business contexts.
The integration of moral reasoning into business education emerges as a pivotal recommendation. The contributors argue that evolving business theory necessitates a triadic framework of prudential, business, and moral reasoning. This educational shift is envisioned to produce leaders and managers who are equipped not only to deliver financial performance but also to actively promote societal progress. Emphasizing moral reflection reshapes traditional curricula that have historically underrepresented ethical deliberation, encouraging a new generation of business thinkers who can negotiate complex trade-offs between wealth creation and social impact.
The significance of this volume is further underscored by its distinguished contributors. Among them are renowned figures such as the late James March, whose foundational work in organizational theory remains influential, and Nobel Laureate Jean Tirole, acclaimed for his analysis of market power and regulation. The anthology also includes insights from eminent scholars like David Autor, celebrated for his research on labor economics, and Philip Kotler, widely recognized as the father of modern marketing. Their diverse perspectives enrich the volume’s critique of business assumptions, adding empirical rigor and conceptual depth.
In addition to economists and management scholars, the book incorporates philosophical analyses from leading thinkers like Amartya Sen, who has extensively studied welfare economics and social choice theory, and Philip Kitcher, renowned for his work on science and ethics. The involvement of philosophers such as Elizabeth Anderson and Kwame Anthony Appiah enhances the discourse by addressing normative questions about justice, identity, and the moral responsibilities of business entities within society. This multidisciplinary dialogue fosters a profound reconsideration of business theory’s ethical dimensions.
One particularly compelling argument presented by Professor Rangan is that the very “operating system” of capitalism may harbor unintended flaws. These arise not from poor implementations or isolated failures but from foundational assumptions that no longer align with complex realities. When business models continue to propagate outdated logics, they risk triggering systemic shocks and scandals—manifestations of misaligned incentives and fractured accountability. This insight invites scholars and practitioners alike to rethink the conceptual software driving economic activities.
Core Assumptions in Business Theory is the culmination of a trilogy developed under the aegis of the Society for Progress. The previous volumes, Performance & Progress (Oxford University Press, 2015) and Capitalism Beyond Mutuality? (Oxford University Press, 2018), laid the groundwork for this incisive exploration. Together, these works map an intellectual journey aimed at bridging the chasm between economic success and societal advancement, advocating for a reimagined capitalist system that delivers shared value instead of zero-sum competition.
The volume’s proposals have timely implications given recent global challenges, ranging from climate change and inequality to corporate governance crises. By challenging the narrow metrics that have long defined business success, the book calls for an expanded evaluative framework that embraces sustainability and human welfare as indispensable to long-term profitability. This shift is not merely idealistic but grounded in rigorous research that demonstrates the risks of ignoring social costs and ethical considerations in business strategy and operations.
Moreover, the book features pioneering models that reconceptualize decision-making processes within firms. The two-stage rationality model, for example, explicitly recognizes that human agents weigh business objectives alongside well-being concerns. This moves beyond mechanistic interpretations toward a richer understanding of motivation, cognitive biases, and the role of culture in shaping economic behavior. Such models promise to better capture the complexities of real-world decision-making and provide a theoretical foundation for designing organizations that are both effective and socially responsible.
The editorial team’s work extends beyond academia, urging educators, policymakers, and business leaders to rethink curricula and institutional design. Fostering moral reasoning alongside analytical skills is framed as essential to cultivating leadership capable of confronting ethical dilemmas intrinsic to modern markets. This educational innovation seeks to embed societal progress as a core objective, aligning organizational purpose with broader human values and rights.
In sum, Core Assumptions in Business Theory: A Wedge Between Performance & Progress represents a landmark intervention in the social sciences and management literature. By diagnosing the deep-seated rifts in contemporary business thinking and offering pathways toward integration, it challenges the status quo and invites a paradigm shift. The urgency and scholarly weight of this work suggest it will spark vigorous debate and influence future directions in research, teaching, and practice, potentially shaping the contours of capitalism for decades to come.
Subject of Research: The fundamental assumptions underlying business theory and their impact on reconciling economic performance with societal progress.
Article Title: Core Assumptions in Business Theory: A Wedge Between Performance & Progress
Web References:
Oxford University Press – Core Assumptions in Business Theory
Image Credits: INSEAD
Keywords: Society, Philosophy, Social research, Social sciences
