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Adam Smith: managerial insights from the father of economics

George R. Crowley (Department of Economics, West Virginia University, Morgantown, West Virginia, USA)
Russell S. Sobel (Department of Economics, West Virginia University, Morgantown, West Virginia, USA)

Journal of Management History

ISSN: 1751-1348

Article publication date: 28 September 2010

3446

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.

Keywords

Citation

Crowley, G.R. and Sobel, R.S. (2010), "Adam Smith: managerial insights from the father of economics", Journal of Management History, Vol. 16 No. 4, pp. 504-508. https://doi.org/10.1108/17511341011073979

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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