management education makes a difference: enhancing german engineering performance

Long Range Planning xxx (2014) 1–22

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Long Range Planning

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Management Education makes a Difference: EnhancingGerman Engineering Performance

Robert A. Paton, Richard Wagner

This study examines the relationship between strategic management education, particularly within the higher education sector, and theperformance of the German machinery and equipment sector. The paper draws on the results of a self-administered questionnaire,supplemented by follow-up micro case studies. Findings suggest that policies adopted by Engineering Faculties and their related in-stitutions have resulted in the exclusion of management, particularly strategic management, from their curriculum: a worrying trendgiven that in the German engineering/manufacturing industries, engineers dominate the senior management positions. Further, thesesenior engineers possess limited management knowledge and apply relatively few strategy-related tools. There is also evidence, notnecessarily causal, that links organisational performance with the application of management knowledge and tools. The study is limitedto senior executives within German SMEs from the machinery and equipment sector and as such the findings and associated conclusionsmay lack generalisability beyond the confines of German engineering. The findings suggest, at least in part, that organisational perfor-mance and managerial educational attainment are related and that educationalists, practitioners and policymakers should encourageEngineering Faculties to embrace management education within the curriculum.

� 2012 Elsevier Ltd. All rights reserved.

Introduction

Engineers have traditionally held senior managerial roles and positions within the German machinery and equipmentsector (VDMA, 2007a). Organisational performance has long been associated with the acquisition and appliance of stra-tegic management expertise (Schmidt and Freund, 1989; Matthews, 1990; Schwenk and Shrader, 1993; McManus et al.,1995; Griggs, 2002; Baker, 2003; Aragón-Sánchez and Sánchez-Marín, 2005; O’Regan and Ghobadian, 2005; Beckeret al., 2006; Meers and Robertson, 2007). Also, the effective implementation of strategic choice has been linked to theappropriate education of the managers charged with delivering organisational performance (Basnet, 2000; Minarro-Viseras et al., 2005; Held et al., 2007). However, there is strong evidence that German engineers, including those inmanagerial and executive positions, are lacking in strategic managerial knowledge and understanding (Schmauder, 2007;Staufenbiel, 2007).

Against this backdrop, this paper seeks, within the context of the German SME machinery and equipment sector, toestablish the extent to which senior managers, particularly those from an engineering background, are familiar with thetools and techniques associated with strategic management and to what extent they apply these tools and techniques. Inaddition, can this knowledge and appliance of strategic capability be associated with enhanced organisational performance?We do not seek identify a causal relationship; there are simply too many factors and variables at play to be so bold, butrather we are looking to establish whether an indicative relationship exists. Ultimately, our aim is to raise awareness,harness support and influence policy and practice with regard to the importance and impact of engineering managementeducation.

The paper is structured as follows. First, the current status of German engineering education is reviewed. This reviewsuggests that management education has indeed been neglected. The industrial sector machinery and equipment, adoptingan SME perspective, is then introduced and an effort made to establish the sectors important to the German economy. Thissector represents a significant economic force and is integral to Germany’s continued economic success. Next, the notion thatorganisational performance and management education can in some way be linked is examined. The anecdotal evidence ispositive and suggests that professional engineering institutes and educators should take note. We then move on to the studyitself, by first addressing how onemight evidence strategic management capability and action. Thenwe turn to methodology,design and study limitations. Finally, we close with the study’s findings and conclusions.

http://dx.doi.org/10.1016/j.lrp.2012.06.0020024-6301/� 2012 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Paton, R.A., Wagner, R., Management Education makes a Difference: Enhancing German En-gineering Performance, Long Range Planning (2014), http://dx.doi.org/10.1016/j.lrp.2012.06.002

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R.A. Paton, R. Wagner / Long Range Planning xxx (2014) 1–222

Engineering education in Germany: where does management sit?

In Germany, graduate engineering is provided by applied science (Fachhochschule) and technical universities (technischeHochschule or Universität). The former tend to bemore practice-orientated and the latermore theoretical. The title engineer isrecognised as being a protected professional university qualification (Odrich, 2010). The curriculum for engineering studiesoffers little, or indeed no, general or strategic management education (Bundesagentur für Arbeit, 2007).

Germany has over 350 universities, of which more than 250 are universities of applied science. The majority of these areoperated by the Federal States, but there is also range of alternative providers, both private and public (Uni Liste, 2009; BMBF,2004). Management education appears to have been neglected: Ramirez (2004: 441) states that “Germanmanagers appear todevelop their managerial skills almost wholly in-house” while Briedis and Minks (2004) note that management competencyis totally ignored when it comes to professional practice. Graduate engineers seeking management education and devel-opment generally turn to on-the-job learning and bespoke training, as well as more formal, often part-time BBAs and MBAsoffered by commercial business schools (Day, 1998; Bjoernavold, 2000; Dohmen, 2001, Svensson et al., 2004).

Strack et al. (2007) report that German human resource executives rated the acquisition and development of managementtalent as a high priority: there is a growing recognition that management educationmust reflect the complexity, technologiesand challenges facing executives (Sharma and Roy, 1996; Friga et al., 2003).

Feller and Stahl’s (2005) study into the future of engineering higher education called for an understanding of basicbusiness economics, but not for enhanced managerial education. Indeed, they stressed that there could be no further dilutionof the engineering qualification. Staufenbiel (2007) notes that in the machinery and equipment sector, top managementpositions tend to be held by engineers, but this observation was not linked to any recommendation as to how one mightenhance their managerial capability. Schmauder (2007) goes on to argue that employers have a preference for engineering jobapplicants to have proven managerial knowledge and understanding. He further links this demand-side desire with thesupply, noting that 70 per cent of graduating engineers seek a career with management potential. Sattelberger (2007)suggests a more praxis-orientated engineering curriculum, but makes no mention of management education. As we havenoted, engineers dominate senior management positions (VDMA, 2007a), yet, as witnessed by the above studies and ob-servations, there appears to be a reluctance to call for enhanced management education with the engineering curriculum.

Given that the university curricula for business economists acknowledges the importance of management education(BMBF, 2006; Bundesagentur für Arbeit, 2007), onemay be forgiven for assuming that economists, rather than engineers, willbe the leaders and executives of tomorrow. Unfortunately for the economists, this is not the case. In reality, especially in themachinery and equipment sector, it is the engineer who provides the strategic direction (VDMA, 2007a) – a fact so far un-acknowledged by German universities. This could, at least partially, explain why German senior executives lack strategicmanagement competence (Dembkowski, 2007).

To sum up, management education has struggled to find space within the German engineering curriculum, even thoughthere is clear evidence that their graduates, in their professional practice, will be required to manage and lead.

The German machinery and equipment sector

According to the VDMA (VDMA, 2005a), the machinery and equipment sector consisted of more than 6000 enterprisesthat generated V132.6 bn of turnover and accounted for 1 m jobs. This industry sector also invested V4.3 bn back into theGerman economy. In terms of exports, the sector exported around 70 per cent of its output and expertise, compared with anall-industry average of approximately 25 per cent (IDW, 2005). The machinery and equipment sector, consisting mainly ofSMEs, faces strategic challenges, particularly from the Far East (Baron, 2005; Sieren, 2006; Ihrcke, 2007; Impuls, 2007; VDMA,2007b). It is therefore vital for the German economy that this sector continues to prosper and grow.

Given the propensity of SMEs within this industrial sector, it is worth noting that the definition of what constitutes an SMEdiffers from the standard European Union definition. The German IfM (Institut für Mittelstandsforschung, Bonn, Institute forSME-Research) applies a different SME classification: small enterprises employ nine staff and have a turnover of up to V1 m;medium-sized companies employ 10 to 499 and their turnover does not exceed V50 m (Guenterberg and Kayser, 2004). IfMfurther states that this equates to 3.38 m enterprises which accounted for 99.7 per cent of VAT-registered firms, 70 per cent ofemployment and 82 per cent of apprenticeships (Guenterberg and Kayser, 2004). These latter statistics further reinforce theimportance of the machinery and equipment sector to the German economy.

Management education and organisational performance

Given the socio-economic importance of the machinery and equipment sector and the proven lack of management ed-ucation among its engineering leadership, it should be of concern to all stakeholders if educational attainment was indeedrelated, even partially, to performance. Studies have suggested that organisational performance, generally measured byproductivity, quality and financial metrics, is indeed influenced by managerial education. For example, Murphy (1989: 47) isparticularly bold in his claim that management education and quality enhancement are positively linked: “Managementeducation doesn’t just support the strategy, it is the strategy.” Others have investigated educational links with financialperformance. Fulmer and Graham (1993: 35) state that companies “tend to be significantly more profitable” if each managerreceives 40 hours of educational enhancement per year. Most researchers have tended to look at a “bundle” of key financial


R.A. Paton, R. Wagner / Long Range Planning xxx (2014) 1–22 3

indicators. This integrated systems approach is recommended by authors such as Neely et al. (2000) and Bititci et al. (1997,2000). In short, many studies in addition to those specifically detailed, for example, Cockerill (1993), Lee et al. (1993),Winterton andWinterton (1996), Barling et al. (1996), Thompson (2000), Horne and Stedman Jones (2001), Longenecker andAriss (2002), Mabey and Ramirez (2003) and Held et al. (2007), all suggest an association between management educationand attainment levels with organisational performance.

The authors are not suggesting a direct causal link between the two, rather that there is certainly a prima facie case thatmanagement education and organisational performance are associated.

Evidencing strategic management in action

Strategic management from an organisational perspective can be traced back to Payne (1957), who introduced the conceptof long range planning, and Ansoff (1957) first coined the term “corporate strategy”. Chandler’s influential work suggestedthat structure follows strategy (1962: 39) while subsequent studies (e.g. Peters, 1984) cast doubt on this pretext. There are agreat many strategic management models and frameworks, for example, Malik (1981), Bleicher (1991), Amann (1995),Hinterhuber (1996), Hahn and Taylor (1999), Welge and Al-Laham (2003) and Steinle (2005). All propose models that tend tofocus on a particular aspect of strategic management, such as adopting an iterative approach, environmental structures, earlywarning systems or an integrated or holistic view. These models tend to promote certain tools, approaches or techniquesdesigned to ease the burden of the hard-pressed executive.

Management scientists, gurus and consultants have been responsible for an ever-increasing array of tools that can beapplied in the context of strategic management. There are many published descriptions and evaluations of these tools(Kappeller and Mittenhuber, 2003; Wagner, 2007). For example, Kappeller and Mittenhuber (2003) identified and describedsome 330 tools.

To establish the extent of strategic management knowledge and application, the researchers required a means of pre-senting the “tools” to the practitioners: therefore, a strategic management framework was created. Based on the E2E strategicmanagement process, 31 tools were selected. The process has several phases as described by various strategic managementmodels (McCarthy et al., 1975; Welge and Al-Laham, 2003; Wagner 2001). Figure 1 details the phases as follows: strategicanalysis; strategic premises and settings; formulation of paramount strategies (strategic direction); business strategies for thefunctional areas (operations, HR, marketing, R&D, finance); and finally strategy execution and controlling.

Methodology

A self-administered questionnaire was employed (Appendix 1: Abbreviated English Translation of the Questionnaire) togather robust data on managerial positions, educational status, strategic knowledge and related tool application and finallyorganisational performance. Given that respondents were identified by a professionally-based and comprehensive industrylisting (see below), the researchers were confident that they were dealing directly with owners and senior executive officers.It should be noted that the industry listing also provided detailed and audited performance indicators for the respondents’enterprises. The authors adopted a positivistic stance throughout and the survey was complemented by micro-case studies.

The contextof the researchwas theGermanmachineryandequipment sectorandwithin the sector the focuswasonSMEswith10 to 500 employees.Machinery and equipment is classified in Eurostat’s subsectionDKbyNACE codes 29 trough 29.72 (Eurostat,2006). The research excluded armaments (NACE 29.6 – 29.60) and appliance manufacturers (NACE 29.7 – 29.72). Respondentswere identified by employing the Hoppenstedt database (Hoppenstedt, 2005, 2006). It offered, at the time of survey (2007), themost robust, current and comprehensive listing of all machinery and equipment SMEs: NACE classification, addresses, fax/phonenumber, e-mail/internet addresses, year founded, number of employees, turnover, return on sales, investment ratio, equity ratio.Given the desire to reach corporate decisionmakers, it also provided the names, titles and functions of the senior executives.

The researchers expected a relatively low response rate (Friedrich, 2008). As a result, it was decided, post a pilot study of 50enterprises, to contact all 6000 enterprises that fell within the designated industry and SME specifications, by both postedand web-based questionnaires. In total, 290 responses were received (January 2009). For postal returns, a rate of 6.9 per centwas achieved and for web-based 3.0 per cent. Return bias assessment (postal versus web-based), using SPSS compare meansmodelling and ANOVA, produce no significant outcome. The non-response bias (Filion, 1975, Colombo, 2000, Socha, 2006)assessed by the comparison of response values with known population values (Armstrong and Overton, 1977) was negligible.

SPSS (v.15) was used for data analysis and evaluation of the statistical software (SPSS, 2006a,b) and descriptive statistics(Elsner, 2003; SPSS, 2006a,b; Diehl and Staufenbiel, 2007) and graphics were applied to describe counts and categories ofvariables. To analyse the relation of variables, the following inference statistics (Fisher, 1959; Pryce, 2005; SPSS, 2006a,b;Moutinho and Hutcheson, 2006, 2008; Diehl and Staufenbiel, 2007; Kinnear and Gray, 2008) were applied:

� Linear regression for exploring relations between continuous variables� Comparison of means to evaluate the relation of continuous variables with categorical variables (ordinal, dichotomous,nominal)

� Cross tabulation, Pearson chi-square test to evaluate the relation between categorical variables (ordinal, dichotomous,nominal)


Figure 1. Management tools in the phases of strategic management


� Scatter plots to display and calculate the relation of continuous variables� ANOVA table and significance level for hypothesis testing

By analysing the open-ended questions, the researchersmanaged to further develop an understanding of the respondents’knowledge and attitude towards the subject. As we will see, six clusters were identified and from each an enterprise wasselected for further study. This exercise both provided useful attitudinal insights and the opportunity to test our emergingthoughts and observations with practitioners.

Findings and discussion

The findings are presented as follows: the general demographics of the respondents are outlined; next, the educationalstatus is introduced; then the topics of tool awareness and application are dealt with; then finally, the respondents’ satis-faction with educational provision is examined. Throughout the discussion of the findings, the authors have endeavoured tohighlight important connections or relationships. The section concludes by a review of one of the six micro case studies.

General demographics

The research study targeted senior executive decisionmakers and it hasmanaged to achieve this: 60 per cent are managingpartners/owners and 31.5 per cent are directors, the remainder being second-tier executives (93.3 per cent are male). Theservice and age demographics tend to confirm, as noted in previously quoted studies, that executives tend to stay in post for



quite some time (average age is 49 and partners/owners have served about 13 years on average in post and executives 10).With little employment “churn”, there may be a tendency for tradition and groupthink to develop and potentially “blinker”strategic development. The technologists and engineers tend to remain in post longest (respectively on average about 16 and12 years), while business economists and the MBA cohort move more freely between employers (respectively on averageabout eight and six years). As we will see, the technologists/engineers still tend to dominate the senior positions. Once again,this may have an impact on strategic capability and intent. Of the responding senior executives (see Figure 2), the highestdegree attained was an engineering qualification (42 per cent) and only approximately 6 per cent had a professionalmanagerial qualification (MBA).

Strategic tools knowledge and appliance

Table 1 details and Figure 3 summarises the knowledge and exposure to the strategic “tool kit”. Non-graduate executiveshave acquired minimal knowledge, while those attaining higher level qualifications have gleamed more from their studies. Itwould appear that post-employment personal development contributes more by way of knowledge. However, a significantproportion of the strategic thinkers/executives appear ignorant of the “tool kit” content and potential: knowledge of almost20 per cent of the tools is lacking and over 23 per cent are not known at all. For quality management-related techniques andapproaches, knowledge penetration is much higher. This reflects the ISO 9001 status of the majority of enterprises within thissector. Other tools, associated with continuous improvement, often termed Kaizen (Imai, 1992), benchmarking and riskmanagement, are also widely known. But these tools tend to reflect productivity, quality, safety and compliance issues. Theyalso tend to be inward looking and industry shaped. EFQM, Ansoff’s product-market grid or Porter’s five competitive forcesare less known: almost half of the respondents failed to acknowledge Kotler’s basic marketing mix. Externally facing, socio-economic related tools are not well understood nor represented either.

The picture is very similar when one turns to the appliance of the tools. Table 2 illustrates this point, as we see themarketing mix still score lowly (26.2 per cent). The general tools average application rate is 36.6 per cent. The application rateappears low, as did the knowledge rate. Executives, particularly engineers/technologists, are not applying the strategic toolsthat will help them understand and shape their enterprises’ future.

Relationship between education and knowledge acquisition

Respondents, as depicted in Figure 4, appear to have acquired some knowledge relating to approximately 50 per cent ofthe strategic “tool kit”. Given the oft-quoted socio-economic importance of this industry segment, it must surely be of someconcern that 91.5 per cent of the respondents are in senior management positions. MBAs are rated at 82.2 per cent, businesseconomists and business engineers at 67.4 per cent and 65.6 per cent respectively, while engineers and technologists arerated respectively at 44.5 per cent and 42.5 per cent. With the aid of the SPSS “compare means” modelling and ANOVA, the

Figure 2. Education of respondents


Table 1Strategic management tools acquired by executives

SM tool Educational area A,pre-graduate

Educational area B, graduate Educational area C,post-graduate

In seminars Self-study Acquired No knowledge Tool unknown Not acquired Total

Count % Count % Count % Count % Count % Count % Count % Count % Count % Count

Benchmarking 4 1.6% 64 24.8% 18 7.0% 56 21.7% 56 21.7% 198 76.7% 44 17.1% 16 6.2% 60 23.3% 258SWOT 1 0.4% 43 16.9% 20 7.8% 45 17.6% 32 12.5% 141 55.3% 55 21.6% 59 23.1% 114 44.7% 255Five competitive

forces (Porter)1 0.4% 40 15.8% 16 6.3% 13 5.1% 16 6.3% 86 34.0% 71 28.1% 96 37.9% 167 66.0% 253

Scenario technique 2 0.8% 45 17.7% 15 5.9% 35 13.8% 41 16.1% 138 54.3% 64 25.2% 52 20.5% 116 45.7% 254Vision 1 0.4% 43 16.8% 19 7.4% 59 23.0% 53 20.7% 175 68.4% 46 18.0% 35 13.7% 81 31.6% 256Mission statement 1 0.4% 30 12.0% 16 6.4% 38 15.3% 33 13.3% 118 47.4% 60 24.1% 71 28.5% 131 52.6% 249Corporate identity

programme1 0.4% 60 23.5% 12 4.7% 64 25.1% 55 21.6% 192 75.3% 33 12.9% 30 11.8% 63 24.7% 255

BCG growth-sharematrix

1 0.4% 62 24.6% 16 6.3% 37 14.7% 27 10.7% 143 56.7% 52 20.6% 57 22.6% 109 43.3% 252

Attractiveness-business-strengthsmatrix

0 44 17.4% 16 6.3% 26 10.3% 25 9.9% 111 43.9% 66 26.1% 76 30.0% 142 56.1% 253

Market-life-cycle-compet.-strengthmatr.

2 0.8% 80 31.1% 19 7.4% 34 13.2% 29 11.3% 164 63.8% 45 17.5% 48 18.7% 93 36.2% 257

Product market grid(Ansoff)

0 45 17.9% 10 4.0% 15 6.0% 15 6.0% 85 33.7% 75 29.8% 92 36.5% 167 66.3% 252

Strategy maps 1 0.4% 22 8.7% 12 4.8% 29 11.5% 26 10.3% 90 35.7% 73 29.0% 89 35.3% 162 64.3% 252Quality management

ISO 90009 3.5% 43 16.6% 12 4.6% 120 46.3% 62 23.9% 246 95.0% 8 3.1% 5 1.9% 13 5.0% 259

TQM (total qualitymanagement)

2 0.8% 42 16.3% 10 3.9% 72 28.0% 52 20.2% 178 69.3% 55 21.4% 24 9.3% 79 30.7% 257

EFQM model 0 11 4.4% 5 2.0% 22 8.7% 24 9.5% 62 24.6% 96 38.1% 94 37.3% 190 75.4% 252Six sigma 2 0.8% 14 5.5% 8 3.1% 40 15.7% 43 16.9% 107 42.0% 94 36.9% 54 21.2% 148 58.0% 255Supply chain

management1 0.4% 45 17.6% 11 4.3% 53 20.8% 62 24.3% 172 67.5% 57 22.4% 26 10.2% 83 32.5% 255

Continuousimprovementprogramme

4 1.6% 54 20.9% 16 6.2% 82 31.8% 75 29.1% 231 89.5% 18 7.0% 9 3.5% 27 10.5% 258

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Skill management 0 17 6.7% 12 4.8% 24 9.5% 33 13.1% 86 34.1% 92 36.5% 74 29.4% 166 65.9% 252Change management 0 20 8.0% 18 7.2% 40 15.9% 37 14.7% 115 45.8% 83 33.1% 53 21.1% 136 54.2% 251Market segment./

different./position.0 60 23.8% 16 6.3% 43 17.1% 49 19.4% 168 66.7% 60 23.8% 24 9.5% 84 33.3% 252

Marketing mix(Kotler, 4 Ps)

0 61 24.2% 15 6.0% 17 6.7% 19 7.5% 112 44.4% 65 25.8% 75 29.8% 140 55.6% 252

Key accountmanagement

1 0.4% 58 22.8% 17 6.7% 50 19.7% 59 23.2% 185 72.8% 46 18.1% 23 9.1% 69 27.2% 254

Innovationmanagement

2 0.8% 40 15.7% 14 5.5% 53 20.9% 65 25.6% 174 68.5% 56 22.0% 24 9.4% 80 31.5% 254

Knowledgemanagement

2 0.8% 36 14.0% 13 5.1% 45 17.5% 67 26.1% 163 63.4% 65 25.3% 29 11.3% 94 36.6% 257

Overhead valueanalysis

7 2.7% 70 27.2% 14 5.4% 48 18.7% 48 18.7% 187 72.8% 43 16.7% 27 10.5% 70 27.2% 257

Zero basebudgeting

0 36 14.2% 10 3.9% 21 8.3% 20 7.9% 87 34.3% 79 31.1% 88 34.6% 167 65.7% 254

Activity database 0 14 5.5% 8 3.2% 20 7.9% 52 20.6% 94 37.2% 90 35.6% 69 27.3% 159 62.8% 253Balanced

scorecards0 28 11.1% 13 5.1% 56 22.1% 45 17.8% 142 56.1% 62 24.5% 49 19.4% 111 43.9% 253

Riskmanagementsystem

4 1.6% 35 13.7% 18 7.0% 56 21.9% 79 30.9% 192 75.0% 37 14.5% 27 10.5% 64 25.0% 256

Early warningsystem

0 36 14.2% 14 5.5% 40 15.7% 69 27.2% 159 62.6% 55 21.7% 40 15.7% 95 37.4% 254

Total 49 0.6% 1298 16.5% 433 5.5% 1353 17.2% 1368 17.4% 4501 57.1% 1845 23.4% 1535 19.5% 3380 42.9% 7881

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Figure 3. Strategic management tools acquired in educational areas

Table 2Strategic management tools applied

Phase of strategic management Strategic management tool Yes, applied No, not applied Total

Count % Count % Count

Strategic analysis and assessment Benchmarking 143 56.1% 112 43.9% 255SWOT 102 40.6% 149 59.4% 251Five competitive forces (Porter) 36 14.6% 211 85.4% 247Scenario technique 82 32.8% 168 67.2% 250Total strategic analysis and assessment 363 36.2% 640 63.8% 1003

Strategic premises and settings Vision 130 52.4% 118 47.6% 248Mission statement 76 30.8% 171 69.2% 247Corporate identity programme 166 65.9% 86 34.1% 252Total strategic premises and settings 372 49.8% 375 50.2% 747

Strategy formulation BCG growth-share matrix 63 25.3% 186 74.7% 249Attractiveness-business-strengths matrix 37 14.7% 214 85.3% 251Market-life-cycle-compet.-strength matr. 66 26.1% 187 73.9% 253Product market grid (Ansoff) 28 11.3% 220 88.7% 248Strategy maps 44 17.6% 206 82.4% 250Total strategy formulation 238 19.0% 1013 81.0% 1251

Functional areasOperations strategy Quality management ISO 9000 206 80.5% 50 19.5% 256

TQM (total quality management) 98 38.9% 154 61.1% 252EFQM model 11 4.4% 237 95.6% 248Six sigma 28 11.3% 219 88.7% 247Supply chain management 104 41.1% 149 58.9% 253Total operations strategy 447 35.6% 809 64.4% 1256

HR strategy Continuous improvement programme 199 78.7% 54 21.3% 253Skill management 35 14.3% 210 85.7% 245Change management 68 27.3% 181 72.7% 249Total HR strategy 302 40.4% 445 59.6% 747

Marketing strategy Market segment./different./position. 128 51.0% 123 49.0% 251Marketing mix (Kotler, 4 Ps) 65 26.2% 183 73.8% 248Key account management 148 58.5% 105 41.5% 253Total marketing strategy 341 45.3% 411 54.7% 752

R&D strategy Innovation management 126 50.2% 125 49.8% 251Knowledge management 97 38.5% 155 61.5% 252Total R&D strategy 223 44.3% 280 55.7% 503

Finance strategy Overhead value analysis 138 55.2% 112 44.8% 250Zero base budgeting 38 15.2% 212 84.8% 250Total finance strategy 176 35.2% 324 64.8% 500Total functional areas 1489 39.6% 2269 60.4% 3758

Strategy execution and controlling Activity database 63 25.3% 186 74.7% 249Balanced scorecards 57 22.8% 193 77.2% 250Risk management system 148 58.7% 104 41.3% 252Early warning system 103 41.5% 145 58.5% 248Total strategy execution and controlling 371 37.1% 628 62.9% 999Grand total 2833 36.6% 4925 63.5% 7758



Figure 4. Average SM tool knowledge rate of education types


relationship between tool knowledge rate and educational type was evaluated: differences between the groups are statis-tically significant (Sig. 0.000).

Educational satisfaction

Respondents’ satisfaction with management education is illustrated in Table 3. Non-graduates appear satisfied, butgraduate engineers far less so and complained openly about the lack of general and strategic management education in theirchosen career path, withmany noting the general lack of practice-orientated education. The business economics and businessengineering graduates seemed generally content with regards to management education. A selection of comments made byrespondents on their university management education is as follows:

� Case 12: “No insights in general management and risk management”� Case 36: “No management education and introduction of strategic management tools during engineering study at all. Iexpect management education during engineering study”

� Case 61: “Only education in engineering science; no introduction to management techniques”� Case 128: “In engineering study, there was no management education at all”� Case 159: “Too much engineering-specific education; communication and leadership seem to be topics for self-study atthe living organisation”

� Case 173: “Too little praxis and project orientation”� Case 205: “Basic education in general management should also be for engineers”

Table 3Satisfaction with management education

Education Pre-graduate education Graduate education Post-graduate education

Verysatisfied

Satisfied Dissatisfied Verydissatisfied

Verysatisfied


Verysatisfied


Facharbeiter,Meister,Techniker

5 14 3

Dipl.-Ing. 3 14 11 1 5 36 38 18Dipl.-Kfm. 2 13 4 1 11 46 6 3Dipl.-Wirtsch.-Ing. 2 1 2 16 2 2 1MBA 1 2 1 8 5 3 11 3 3Other education 1 3 2 2 1 1



� Case 220: “Hardly any management education in engineering study; students usually have little or no affinity tomanagement”

� Case 241: “Missing offers for general and strategic management education”� Case 278: “No practical examples or case studies; pure transfer of theory”

\Education with strategic management knowledge application

Figure 5 depicts, for respondents and enterprises applying strategic management tools and principles (210 cases), theaverage strategic management application rate, which was almost 37 per cent, by differing educational types. Possibly notsurprisingly, those who have been more exposed to management education – the MBAs, business engineers and businesseconomists – score more highly than the others. Non and graduate engineers show the lowest rates of 30.8 per cent and 32.7per cent respectively: this shows a lack of knowledge and application. Once again, SPSS and ANOVA testing were employedand the differences between groups are statistically significant (Sig. 0.015).

Figure 6 depicts, for the 210 cases noted previously, the average strategic management tool absorption rate (applied tools/acquired tools * 100) by educational types which was almost 67 per cent. Respondents with other technical education reachthe highest level of 75.6 per cent followed by engineers with 69.7 per cent. MBAs and business economists show the lowestlevel of 59.1 per cent and 58.7 per cent respectively. Those with other technical education and engineers seem to be moreinclined to apply acquired knowledge in praxis. With the aid of the SPSS “compare means” modelling and the ANOVA table,the relation of the strategic management tool absorption rate with the type of education was evaluated. The differencesbetween the groups are statistically significant (Sig. 0.022).

Continuing management education relationships

In the past five years, about 85 per cent of the respondents claimed to have engaged in some form of training or devel-opment, the net result being that executives averaged approximately three days’ training per year. Figure 7 provides moredetail: MBAs and non-graduates lead theway.With the aid of the SPSS and ANOVA, there is no significant statistical differencebetween the means of the groups (Sig. 0.196).

Figure 8 depicts the preference of continuing strategic management education: self-study, seminars and networking beingthe most preferred.

Performance outcome relationships

The relationship between continuing strategic management education and variables associated with company perfor-mance were evaluated with the aid of linear regression and ANOVA testing. No significant relationship was found with any of

Figure 5. Average SM tool application rate of education types


Figure 6. Average SM tool absorption rate of education type


the dependent variables/key indicators tested: turnover per employee, return on sales (ROS), equity ratio, R&D ratio andcontinuous improvement rate (suggestions per year per employee). These key indicators are used within the sector inquestion to assess performance and as such were adopted by this study (VDMA, 2005b).

When considering educational background and performance, only those respondents with strategic accountability and arecord of appliance were included. Table 4 details the results.

Business engineers achieve, on average, the highest turnover per employee (V200,600) followed by engineering econo-mists (V182,900) and business economists (V179,100). We previously noted that there was a tendency to concentrate onperformance/efficiency related “tools”. This result in some ways reinforces the engineering tendency to focus on efficiency

Figure 7. Continuing management education and education types


Figure 8. Preference of continuing management education


and productivity. The findings also indicate that MBAs tend to generate, on average, the highest (8.1 per cent) and engineersthe lowest (6.7 per cent) ROS. This outcome may reflect the MBAs’ preoccupation with the “bottom line”.

Business economists show, on average, the highest equity ratio (35.8 per cent) followed by business engineers (35.5 percent) and engineers (32.1 per cent). MBAs achieve the lowest equity ratio (27.5 per cent). This may suggest that businesseconomists tend to focus on the balance sheet. On average, MBAs show the highest R&D rate (4.3 per cent) followed by en-gineers (3.2 per cent). This could possibly be indicative of innovative tendencies. Regarding the continuous improvement rate,only those with some form of suggestion schemewere considered – around 60 per cent of the respondents were included. Onaverage, MBAs generate the highest rate of 0.41 per cent, possibly because of placing a higher value on employee inputs.

With the aid of the SPSS and ANOVA, the relationship between the type of education and the selected key performanceindicators was evaluated: there was no significant statistical difference between the means of the groups.

Micro case studies

In an effort to gain further insights into managerial perceptions, performance relationships and strategic tool kit usage, sixmicro case studies were developed. Respondents were clustered according to such parameters as their return on sales,educational type and knowledge awareness. By way of example, we have included, depicted in Figure 9, a sample micro case.

Themap depicts a company (4943) owned andmanaged by a 44-year-old diploma engineer with a doctoral degree. He hasheld that position for two years. The company develops and manufactures bagging systems. The company did not do well in2007, yet the year was deemed to have been “good” for the sector, both nationally and internationally. For example, the returnon sales (ROS) is well below average leading to low profitability.

When one looks in detail at the respondent’s return, it becomes clear that strategically he knows of seven tools but appliesonly five. In addition, he cannot recall the last time he engaged inmanagerially-orientated professional development. Further,he stated: “I have no idea what strategic management is all about.” It can be assumed that his strategic managementknowledge is poor. Consequently, he does not do any strategic planning. The R&D ratio of 0.5 per cent is far below average. Theexecutive cites recession as the major forthcoming challenge: he seems resigned to cost-saving measures and austerity andcan cite no proactive intent.

The above is typical of an engineering-led enterprise’s responses to the survey: they have little managerial knowledge andrarely apply the associated tools. The case supports the quantitative findings, in that engineers tend to be lacking inmanagerial knowledge and understanding and that such a capability can indeed influence performance.

Table 5 details the management tools acquired and applied by the six micro cases. It is evident that engineers have littlemanagement knowledge in comparison with the business economists, again illustrating a lack of managerial educationwithin the German engineering curriculum. The list also shows that engineers’ management knowledge and application ismore focused on the functional areas and less on strategy formulation. Furthermore, the list shows that companies with highperformance are led by executiveswith a higher rate of management knowledge and application:management education andstrategic practice positively impact company performance.

Conclusions

This paper and the research it documents have endeavoured to shed some light and provide a degree of insight into thecurrent status of engineering management education in Germany. In particular, by associating educationwith performance it


Table 4Relation of education type with performance outcome

Education Key performance indicators

Turnover per employee in1000 V ANOVA Sig. 0.286

Return on salesANOVA Sig. 0.861

Equity ratioANOVA Sig. 0.416

R&D ratio ANOVASig. 0.226

Continuousimprovement rateANOVA Sig. 0.786

Average ingroup

Overallaverage

Count Average ingroup

Overallaverage


Overallaverage


Overallaverage


Overallaverage

Count

Facharbeiter,Meister,Techniker

143.4 175.6 27 7.0 7.0 21 28.6 32.6 22 2.5 3.0 26 0.31 0.31 16

Dipl.-Ing. 182.9 111 6.7 94 32.1 86 3.2 107 0.31 72Dipl.-Kfm. 179.1 72 7.0 56 35.5 59 2.7 66 0.28 42Dipl.-Wirtsch.-Ing. 200.6 25 7.0 21 32.2 18 3.0 24 0.31 10MBA 157.3 17 8.1 14 27.5 11 4.3 15 0.41 13Other education 138.6 14 6.9 10 35.8 11 2.5 26 0.12 5

R.A.Paton,R.W

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Figure 9. Findings and conclusion map: engineer leading as low performing company


has attempted to scope the potential socio-economic impact that may be attributed to a lack of strategic capability andcompetence. We have noted the importance of the machinery and equipment sector to the German economy and suggestedthat the sector is increasingly under competitive pressure: manufacturers in China and India are logistically better placed toserve the emerging markets and are continuously enhancing their product and service offering (Bitzer et al., 2004; Impuls,2007; Koehler et al., 2006; Steingart, 2006). Our research echoes the findings of previous studies that have identified,within Germany and beyond, that a lack of general as well as strategic management education impedes an organisation’soverall performance (Kayser, 1987; Ramirez, 2004; Dembkowski, 2007; Held et al., 2007). Given, as we indicated previously, alack of managerial input into the German engineering curriculum, combined with the clear evidence that engineering en-terprises continue in the main to be run by professional engineers, is it not time to reconsider curriculum design and theprofessional managerial status of the industries’ leaders?

We would like to highlight what we consider to be some of the primary conclusions from this research project. Theseconclusions support our original concerns and research intent, as well as the general overview above.

Knowledge of strategic management tools and their application

Ramirez (2004: 441) stated that “German managers appear to develop their managerial skills almost wholly in-house.”Nothing appears to have changed since and this study identified a relatively lowmanagement tool knowledge rate of 55.2 percent and noted that this was acquiredmainly post-graduation – indeed only 16.5 per cent was acquired during formal studies.In addition, the senior executive respondents admitted to only applying 36.6 per cent of the listed strategic tools (Engineersreported only 32.7 per cent). This supports the assertions made by Dembkowski (2007), namely, the main weakness ofGerman managers lies in their lack of strategic thinking and experience.

Prior education satisfaction and management knowledge acquisition

The relationship between the nature of graduate education and the rate of management knowledge is significant.MBAs acquired almost twice as much knowledge (82.2 per cent) compared with engineers (44.5 per cent). The lack ofmanagement knowledge among German engineering executives is surprising given the importance, previously re-ported, that many practitioners, professional bodies and academics place on the integration of engineering andmanagement. What is most surprising is that the engineering and technologist respondents clearly felt let down bytheir educational experience, particularly in relation to management and professional practice within the Universitysector. Could it be that the Engineering faculties are not listening? Indeed, even if they are, could they deliver the“goods”?


Table 5Strategic management tools acquired and applied

Phase of strategicmanagement

No Strategicmanagementtool

Case Engin.Low perform.

Case Engin.Med. perform.

Case Engin.High perform.

Case Bus.Ec.Low perform.

Case Bus.Ec.Med. perform.

Case Bus.Ec.High perform.

Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl.

Strategic analysisand assessment

1 Benchmarking 1 1 1 1 1 1 1 12 SWOT 1 13 Five competitive

forces (Porter)1

4 Scenario technique 1 1 1 1 1Strategic premises

and settings5 Vision 1 1 1 1 1 1 1 16 Mission statement 1 1 1 17 Corporate identity

programme1 1 1 1 1 1 1 1 1

Strategyformulation

8 BCG growth-sharematrix

1 1 1 1 1 1

9 Attractiveness-business-strengthsmatrix

1 1 1 1

10 Market-life-cycle-compet.-strengthmatr.

1 1 1 1 1 1

11 Product marketgrid (Ansoff)

1

12 Strategy maps 1Functional areasOperationsstrategy

13 Quality managementISO 9000

1 1 1 1 1 1 1 1 1

14 TQM (total qualitymanagement)

1 1 1 1 1 1

15 EFQM model 1 116 Six sigma 1 1 1 117 Supply chain

management1 1 1 1 1 1 1 1 1

HR strategy 18 Continuousimprovementprogramme

1 1 1 1 1 1 1 1 1 1 1 1

19 Skill management 120 Change management 1 1 1 1 1 1 1 1

Marketingstrategy

21 Market segment./different./position.

1 1 1 1 1 1 1 1

22 Marketing mix(Kotler, 4 Ps)

1 1 1 1

23 Key accountmanagement

1 1 1 1 1 1 1 1

R&D strategy 24 Innovationmanagement

1 1 1 1 1 1 1

25 Knowledgemanagement

1 1 1 1 1 1

Finance strategy 26 Overhead valueanalysis

1 1 1 1

27 Zero base budgeting 1 1 1Strategy execution

and controlling28 Activity database 1 1 1 1 1 1 129 Balanced scorecards 1 130 Risk management

system1 1 1 1 1 1 1 1

31 Early warning system 1 1 1 1 1Number of tools instrategic analysis

0 0 1 1 1 1 1 1 2 2 4 2

Number of tools instrategic premisesand setting

0 0 1 1 2 2 2 2 3 2 3 3

(continued on next page)



Table 5 (continued )

Phase of strategicmanagement

No Strategicmanagementtool

Case Engin.Low perform.

Case Engin.Med. perform.

Case Engin.High perform.

Case Bus.Ec.Low perform.

Case Bus.Ec.Med. perform.

Case Bus.Ec.High perform.

Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl. Acqu. Appl.

Number of tools instrategyformulation

0 0 3 0 2 0 3 1 2 2 5 0

Number of tools infunctional areas

6 4 6 2 6 3 11 10 10 8 15 10

Number of tools instrategyexecution andcontrolling

1 1 1 0 1 0 3 2 3 3 4 3

Number of tools total 7 5 12 4 12 6 20 16 20 17 31 18

Engin. ¼ Engineer; Bus.Ec. ¼ Business economist; Perform. ¼ Performance; Med. ¼ Medium; Acqu. ¼ Acquired; Appl. ¼ Applied.


Continuing management education and performance

Executives appear to prefer self-study, seminars and networking to more formal continuing management educationinitiatives. Given their dissatisfaction noted above, this may not be that surprising! In addition, there was some evidence thatengineers indulge less in personal development and training. On the positive side, this study did not, as others have done(Fulmer and Graham, 1993; Lee et al., 1993; Winterton and Winterton, 1996; Pfeffer, 1998; Purcell et al., 2003), find anyrelationship between continuing managerial development and performance. It would appear that if managerial education ispositively addressed it may be necessary for the Universities to take the matter seriously.

Graduate education, strategic management knowledge application and performance

The relationship between graduate education and the application rate of management tools is significant. For respondentswith an engineering university education, we have the lowest rate, but there is evidence that they are more inclined to applymanagement knowledgewhen acquired. There is slight evidence that engineers seem to be less inclined to apply the strategicplanning process. Although statistically not significant, the study provided evidence that the type of graduate education isrelated to performance. MBA executives have an application rate of 41.1 per cent and generate on average a 21 per cent higherreturn on sales than engineers. However, the findings suggest that MBAs and engineers tend to promote innovation and bothshow an above average R&D rate.

Figure 10 depicts an overall summary of the key findings and conclusions of the research project. It endeavours to presenta diagram of the nature and strength of the relationships between the key variables. Relationships with statistical significanceare denoted by either a positive (þ) or negative (�) sign, with the former indicating a positive relationship, such as highseniority relates to high ROS or R&D ratio, and the later a negative relationship, such as howhigh age relates to low knowledgeof strategic management tools.

Recommendations

In an ideal worldwe could point to the lack ofmanagement education and link this directly to the impaired performance ofenterprises. Quite clearly, we are not in such a position. We can point to a clear skills and knowledge gap for managementwithin the sector studied; a neglect of management within the engineering curriculum; a desire by practising engineers forthe inclusion of management within the engineering syllabus; a general desire among executives that theory and practice beintegrated; and anecdotal evidence that one could consider there to be a relationship between strategic management edu-cation, the appliance of associated techniques and organisational performance. We can express concern that such a socio-economically critical industrial sector appears to be facing a challenging future without a clear understanding of the needfor and the appliance of strategic foresight and management (Bitzer et al., 2004; Schnitzler, 2005; VDMA, 2007b). Indeed, wemay even be as bold as to express concern that the machinery and equipment sector may be typical of German engineering ingeneral, in which case the recommendations that follow are even more critical to the future success of the German economy.

The recommendations and actions noted below have been formulated after having contacted a number of German En-gineering Deans. The research findings were presented to them with a view to establishing their reaction and exploring anypotential outcomes. Unfortunately, the receptionwas not overly promising. It would appear that the general feeling is that thesole purpose of engineering faculties is to teach engineering/technology theory and associated practice. The curriculum isalready hard pressed and leaves little or no space for ancillary subjects. Further, the core staffing does not have the capabilityto deliver what might be considered liberal professional development. In short, the message was that there was no appetitefor change. The authors’ immediate response was to commence a lobbying campaign. An executive report based on thefindings of the research has been prepared and circulated to a number of stakeholders: the respondents; their professionalbodies; the industry bodies; HE funding and regulatory bodies and other engineering professional associations. In addition,


Figure 10. Relation and conclusion map of research key findings


the research is being published in learned journals and professional/industry publications. We are convinced that change isneeded and any barriers must be overcome.We urge all stakeholders to seek out best practice and find a means of applying itwithin the German context.

There are neither governance nor regulatory obstacles (BMJ, 2007; BSJ, 2009; BSJ, 2001) to the development of a moreliberal and progressive engineering curriculum, but there does appear to be ideological and resource-related barriers. Therecommendations that follow may alleviate the impact of such barriers and facilitate the changes the authors feel necessary.

It seems to us obvious that some means of securing additional resource and curriculum space must be found. Werecommend a partnership solution: engineering faculties and business schools working in collaboration, not necessarily onthe scale of MIT, but at least on a federated basis. German universities have only recently embraced business andmanagementeducation (Ramirez, 2004; Bundesagentur für Arbeit, 2007; Heinemeier, 2008) so if the capability cannot be found in-housethen the private sector may provide the answer. The resource is there – it just has to be harnessed. The engineering pro-fessional bodies and institutions should be called on to provide the practitioners and the experience to enliven managementand business education. The industry is large and recognised as being world class so surely the resource could be found toaugment traditional classroom teaching. Resources are there but where is the curriculum space?

No one is suggesting to drop, for example, thermodynamics to make way for Porter’s Five Forces. Instead, the curriculumcould be extended by engaging in the provision of professional studies provided in conjunction with, but in addition to, thestandard engineering curriculum. A suite of practice-orientated offerings, underpinned by theory but not driven by it, couldbe delivered in novel ways. For example, online tutorials and self-help packages; internships; in-housemini projects; eveningseminar series; business simulation games; intensive summer schools; industry websites (IBM and many other internationalcorporations provide open-access materials for academic staff and students); or, the formation of business/managementsocieties and let the students drive their learning. Space can be found and learning media accessed with relatively minimalexpense. If there is a will, a way will be found.

What we suggest may be novel for German engineering educators but it is not elsewhere. As part of this study, the authorsundertook an indicative review of business and management education within engineering degrees. It ranges from theprovision of essentially standalone courses provided on a service teaching basis through substantial multi-disciplinaryprovision integrated with internships and projects. Best practice exists and it must be publicised to the German stake-holders. To this end, we have extended our research collaboration to search for best practice that may be readily adapted tothe German engineering context. We are actively encouraging our networked stakeholders to do likewise.

To summarise, we can overcome resource and space barriers, adopt and amend best practice, be innovative and competemore intelligently. But we can only succeed if there is a change in mindset. The lobbying must continue; professional bodies,government agencies and industry itself, must leverage their power, influence and euro to effect change.



Appendix 1. Abbreviated English Translation of Questionnaire



Acronyms

ANOVA Analysis of varianceBBA Bachelor of business administrationBCG Boston Consulting GroupBMBF Bundesministerium für Bildung und Forschung (Federal Ministry of Education and Research), GermanyBMJ Bundesministerium der Justiz (Federal Ministry of Justice), GermanyBSJ Bayerisches Staatsministerium der Justiz und für Verbraucherschutz (Bavarian State Ministry of Justice and

Consumer Protection)Dipl.-Ing. Diplomingenieur (diploma engineer)Dipl.-Kfm. Diplomkaufmann (business economist)Dipl.-Wirtsch.-Ing. Diplomwirtschaftsingenieur (business engineer)E2E Enterprise to enterpriseEFQM European Foundation for Quality ManagementEU European UnionHE Higher educationHR Human resourcesIDW Institut der deutschen Wirtschaft Koeln (Cologne Institute for Economic Research)IfM Institut für Mittelstandsforschung, Bonn, Germany (Institute for SME-Research)ISO International Standards OrganizationMBA Master of Business AdministrationNACE Nomenclature statistique des Activités économiques dans la Communauté Européenne (General Industrial

Classification of Economic Activities within the European Communities)R&D Research and developmentROS Return on salesSME Small and medium-sized enterpriseSPSS Statistical package for social scienceSWOT Strengths, weaknesses, opportunities, threatsVDI Verein Deutscher Ingenieure (Association of German Engineers)VDMA Verband Deutscher Maschinen- und Anlagenbau e.V. Association of German Machinery and Equipment

Manufacturers)

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Biographies

Robert A. Paton is currently a Professor of Management and Director of Graduate Studies at the University of Glasgow Business School. He researches,publishes and lectures in the field of managing change, knowledge management and increasingly service innovation, he has collaborated internationallywith co-researchers and various organisations. At present, he is concentrating efforts on developing a network of like-minded scholars and practitioners,partly sponsored by IBM, to provide a focus for services innovation within a supply chain context. Of particular interest will be how best to prepare for andsubsequently support meaningful and sustainable service transactions within a partnership settings. He has published widely, for example in the Journal ofInformation Technology,Management Decision, Knowledge Management, European Management Journal and International Journal of Production Management. Inaddition, he holds editorial and reviewer roles, including Executive Editor of the European Management Journal. E-mail: [email protected]

Richard Wagner After graduating with an engineering degree in 1973 from the University of Applied Science, Würzburg/Schweinfurt, Germany, RichardWagner worked as an Operations Engineer, Team Leader, Manager, Senior Manager, Vice-President and President in Austria, Germany and the US forEuropean companies in the machinery and equipment sector. In 1990, he graduated with a BBA, then followed by aMBA in 1991, from the Graduate School ofBusiness Administration, Zürich, Switzerland, and in 1997, started his own consulting company, providing consulting services for restructuring, turnaroundmanagement, interim management and project management for small and medium-sized businesses as well as for large size international corporations. In2010, he was awarded a PhD from the University of Glasgow, Scotland, for his thesis on “The Effects of Management Education upon Strategic Practice andPerformance: The Case of the German SME Machinery and Equipment Sector”. He has published in the area of strategic management and is AssociateLecturer at the University of Glasgow. E-mail: [email protected]





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management education makes a difference: enhancing german engineering performance

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