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Adam Smith: managerial insights from the father of economics

Adam Smith: managerial insights from the father of economics Purpose – The paper aims to apply the ideas found in the paper of Adam Smith, the pre‐eminent eighteenth century economist, to the field of management. Design/methodology/approach – The paper provides a brief biography of Smith, summarizes his main contributions, and then applies them to contemporary management practices. Findings – Adam Smith was the first person to identify specialization and the division of labor as the main drivers of productivity. He also conceptualized the “invisible hand principle” which explains how, under the proper set of incentives, self‐interested individuals are directed to pursue activities that benefit the whole of society. Both ideas are of utmost importance in the field of management. Specifically, successful managers are those who are able to create good “rules of the game” which align the incentives of labor with the goals of the firm. Practical implications – Smith's contributions provide a foundation for the division of labor and demonstrate the importance of establishing the right “institutions” within a firm. Originality/value – The paper arrives at practical implications for managers from the paper of an eighteenth century economist. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Management History Emerald Publishing

Adam Smith: managerial insights from the father of economics

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1751-1348
DOI
10.1108/17511341011073979
Publisher site
See Article on Publisher Site

Abstract

Purpose – The paper aims to apply the ideas found in the paper of Adam Smith, the pre‐eminent eighteenth century economist, to the field of management. Design/methodology/approach – The paper provides a brief biography of Smith, summarizes his main contributions, and then applies them to contemporary management practices. Findings – Adam Smith was the first person to identify specialization and the division of labor as the main drivers of productivity. He also conceptualized the “invisible hand principle” which explains how, under the proper set of incentives, self‐interested individuals are directed to pursue activities that benefit the whole of society. Both ideas are of utmost importance in the field of management. Specifically, successful managers are those who are able to create good “rules of the game” which align the incentives of labor with the goals of the firm. Practical implications – Smith's contributions provide a foundation for the division of labor and demonstrate the importance of establishing the right “institutions” within a firm. Originality/value – The paper arrives at practical implications for managers from the paper of an eighteenth century economist.

Journal

Journal of Management HistoryEmerald Publishing

Published: Sep 28, 2010

Keywords: Economic theory; Management theory; Division of labour; Economic history

References