Is higher education really internationalising?

Is higher education Is higher education really really internationalising?internationalising?

Professor Nigel HealeyProfessor Nigel Healey

22ndnd Asia-Pacific Professional Leaders in Education Asia-Pacific Professional Leaders in Education ConferenceConference

July 14, 2006July 14, 2006

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OverviewOverview

Universities as international players

The Uppsala Model of Internationalisation

universities as exporters

universities as franchisers

universities as foreign investors: joint vs sole ventures

A business perspective on universities’ internationalisation

An alternative explanation for universities’ internationalisation

The outlook for the future of internationalisation in higher education

Universities as Universities as international playersinternational players

Globalisation seen as a 20th/21st century phenomenon

But…universities ‘born global’ as religious seminaries in 15th century

international staff (and elite student) base

shared common languages: Latin, German, English

scientific inquiry is a collective, international endeavour

Internationalisation of student body on a mass scale is a new phenomenon:

during Cold War, international students part of geo-politics for West

today, there are >2m international students

Universities as Universities as international players (2)international players (2)

Focus of attention today on this aspect of HE globalisation: foreign students studying on a university’s home campus;

and

foreign students studying for the university’s awards on an off-shore campus or by distance-learning (‘transnational education’)

Key question: Is this process ‘globalisation’ as we understand it in a

business context… or something else altogether?

The Uppsala Model of The Uppsala Model of InternationalisationInternationalisation

Sequencing model drawn from the literature on the internationalisation of business: Exporting

Licensing production

Joint ventures

Sole Ventures

How does higher education fit this model?

Collectively sometimes called the ‘third wave’

Universities as exportersUniversities as exporters

Exporting educational services = providing education to foreign students (equivalent to exporting tourism services) by: teaching students on home campus

teaching students through ‘pure’ distance learning’ (ie, without the support of a local agent or campus)

How big is this market?

Universities as exporters Universities as exporters (2): how big?(2): how big?

Table 1: International Students in On-shore Higher Education (millions)

2000 2001 2002 2003% Change 2000-03

Enrolled in All Countries 1.62m 1.65m 1.90m 2.12m 30.6%

Enrolled in OECD 1.52m 1.54m 1.78m 1.98m 29.8%

Enrolled in OECD as % Total 93.9% 93.5% 93.8% 93.3%

Source: OECD Education at a Glance 2005

Universities as exporters Universities as exporters (3): the MESDCs(3): the MESDCs

Table 2: International Students in On-shore Higher Education (2005)

AustraliaNew

ZealandUnited

KingdomUnited States

International Enrolments 163,930 30,674 318,395 565,039

International as % Total 17.7% 14.0% 13.0% 4.0%

Sources: IDP Australia; Education New Zealand; Institute for International Education (US); UK Council for International Education

Universities as exporters Universities as exporters (3): source markets(3): source markets

Table 3: Source Regions of On-shore International Students in Higher Education (2003)

Australia New Zealand United Kingdom United States

Total from Africa 3.7% 0.7% 8.3% 6.9%

Total from Asia 71.4% 84.2% 40.8% 62.8%

Total from Europe 9.5% 6.0% 40.3% 13.1%

of which, from EU 2.9% 4.5% 35.3% 7.7%

Total from North America 4.2% 4.8% 8.5% 10.4%

Total from Oceania 3.9% 3.9% 0.8% 0.8%

Total from Latin America 1.0% 0.5% 1.0% 6.0%

Not specified 6.3% - 0.3% -

Total 100.0% 100.0% 100.0% 100.0%Source: OECD Education at a Glance 2005

Universities as exporters Universities as exporters (4): virtual exports(4): virtual exports

Distance-learning = ‘virtual’ higher education exports, but: boundaries between on-campus and distance-learning constantly

changing (WebCT and Blackboard, now merging)

boundaries between virtual exports and franchising/joint ventures changing (where foreign students have local support)

no good data sources on distance learning (only OBHE)

But clearly big: University of Phoenix – 170,00 graduates since 1976

Open University – graduated 200,000th student in 1998, presently has 180,000 enrolments

Universities as franchisersUniversities as franchisers

Franchising = licensing production

For universities:

franchising = licensing a foreign partner, normally a private for-profit college to offer part or all of a degree (1+2, 2+1, 3+0, etc)

sometimes termed ‘McDonaldization’ of higher education

Universities as franchisers Universities as franchisers (2): how big?(2): how big?

UK: no definitive data British Council in 2004 estimated:

180,000 off-shore international students studying UK degrees vs 270,000 on-shore

3m exam invigilated in 2003 by BC UK’s Quality Assurance Agency audits

franchised degrees since 1976:18 Malaysia, 14 Greece, 10 Spain, 8 Israel, 7

Singapore…

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Universities as franchisers Universities as franchisers (3): how big?(3): how big?

Australia: only systematic collector of data on its universities’ off-shore activities

But host governments monitoring foreign universities’ activities, eg: Indian National Assessment and Accreditation

Council, 1994

South African Higher Education Quality Committee, 1997

Singapore Quality Class for Private Education Organisations, 2003

Universities as franchisers Universities as franchisers (4): how big in Australia?(4): how big in Australia?

Table 5: Australian On-Shore and Off-Shore International Students

2001 2002 2003

Total On-Shore 83,992 131,639 151,884

Total Off-Shore 28,266 53,419 58,513

Total 112,258 185,058 210,397

Source: Australian Vice-Chancellors Committee

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Universities as franchisers Universities as franchisers (5): how big in Australia?(5): how big in Australia?

Table 6: Number of Australian Off-Shore Programmes

Pre-2000 2000 2001 2002 2003

Cumul-ative Total

China 98 30 22 24 24 200

Hong Kong 154 21 26 23 16 227

Indonesia 15 3 2 1 3 25

Malaysia 174 59 28 24 29 321

Singapore 194 43 30 58 53 375

Other 260 62 39 43 18 421

Total 895 218 147 173 143 1569

Source: Australian Vice-Chancellors Committee

Universities as foreign Universities as foreign investors: the ‘third wave’investors: the ‘third wave’

Foreign investment = offshore production and distribution facilities, part– or wholly-owned by universities

Many ‘branch campuses’ are small executive training centres or joint ventures by MESDC universities sharing space on the host’s campus:

University of Chicago – Singapore

University of Stanford – Nanyang Technological University

Universities as foreign Universities as foreign investors (2): joint venturesinvestors (2): joint ventures

Table 7: Stand-alone Branch Campuses in Malaysia and Singapore

Malaysia Singapore

Foreign Partner Estab. Foreign Partner Estab.

Monash University, Australia

1998 INSEAD, France 2000

University of Nottingham, UK

2000

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Universities as foreign Universities as foreign investors (3): joint venturesinvestors (3): joint ventures

2003 ‘Regulations of the People's Republic of China on Chinese-Foreign Cooperation in Running Schools’

University of Nottingham Ningbo joint-venture with the Wanli Education Group and Zhejiang Wanli University

University of Liverpool joint venture with Xi'an Jiaotong University and Laureate Educational Limited

http://www.nottingham.ac.uk/

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Universities as foreign Universities as foreign investors (4): sole venturesinvestors (4): sole ventures

University of New South Wales’ campus in Singapore

‘UNSW Asia is Singapore's first comprehensive private University, due to open in 2007... UNSW Asia is owned and operated by the University of New South Wales …[and] is the first wholly owned research and teaching institution to be established overseas by an Australian university’

A business perspective on A business perspective on universities’ internationalisationuniversities’ internationalisation

Prima facie evidence that universities are following the Uppsala sequential model of internationalisation…

…and universities fit criteria in economic literature for horizontal integration across countries: they have ‘ownership-specific advantages over local

universities (research base, curricula, faculty)

these are best exploited by the universities rather than being sold (product linked to faculty, principal agent problem)

it is more profitable to deliver in foreign market than home market (access to new student base)

A business perspective on A business perspective on universities’ internationalisation (2)universities’ internationalisation (2)

So… isn’t it clear?

Higher education is following the Uppsala model of internationalisation…and

…this model should allow us to predict the future shape of higher education across the world: the continued proliferation of branch campuses?

the emergence of truly multinational universities (University of Nottingham, UNSW)?

the development of regional clusters (eg, Singapore and Malaysia)?

An alternative explanation: An alternative explanation: the supply-sidethe supply-side

Why do (MESDC) universities want foreign students?

Most universities publicly owned or funded; private universities mostly not-for-profit

Higher education is heavily regulated and central part of government policy

Traditional view of higher education: higher education = a ‘public good’

therefore higher education publicly subsidised, tuition free in many countries

why foreign students? - geo-political motives

An alternative explanation: An alternative explanation: the supply-side (2)the supply-side (2)

Higher education ‘superior good’, participation rates have increased from 3-5% in 1960 to >50% in OECD

Challenges to traditional view:

private rate of return so high, no practical need for public subsidies; no impact from higher tuition fees on participation in UK, NZ and Australia

public subsidies lead to regressive distribution of income

governments have had to reduce real value of public subsidies as participation has increased


Most OECD countries now have, or are considering, tuition fees for domestic students…

…but domestic fees still regulated, even though public subsidies inadequate

Fees for international student deregulated first MESDC governments have encouraged recruitment of

international students, especially in high-margin subjects (eg, business) to cross-subsidise research and domestic students

HE exports are not a product of commercial profit-maximisation, but the distortionary effect of government policy and regulation


Why franchise?

as MESDC universities became dependent on exports, so early partners get increased bargaining power to move from 1+2 to 3+0

scrutiny by home/host agencies increases compliance costs, may deter franchising

Why foreign investment?

few real examples and these are all the result of host government policy – Singapore, Malaysia, China, inviting top universities to build up domestic capacity

An alternative explanation: An alternative explanation: the demand sidethe demand side

Why do students (in developing countries) want to study in foreign (MESDC) universities?

MESDCs have most of the world’s top universities; elite students have always wanted to study at Harvard or Oxford

English is the world’s common second language

But…

25% of World's (THES) Top 50 universities now outside MESDCs – Beijing (15th), Tokyo (16th), HKU (41st), NTU (498th), IIT (50)

many non-MESDC universities teach in English

An alternative explanation: An alternative explanation: the demand side (2)the demand side (2)

Main drivers of demand for higher education in developing countries are:

High per capita GDP growth

• higher education is a ‘superior good’

• per capita GDP growth leads to proportionately greater demand for higher education

Population demographics (growing proportion of young people)

Income distribution (‘size of middle class’)

• 200-300m in India, 60-100m in China


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Figure 1: IDP Estimates for Global Demand for Higher Education


Now factor in the domestic supply-side:

expansion constrained by high fixed costs to set up universities

shortage of trained faculty (nationally and globally)

long lead times

So the demand for international higher education in developing countries is driven by:

unsatisfied excess demand for domestic higher education (eg IIM success rates 0.15-0.4%)

ability to pay for higher education in MESDC

Growth in per capita GDP reinforces both drivers (excess demand and ability to pay)


Figure 2: IDP Estimates of Demand for International H.E.

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2000 2005 2010 2015 2020 2025

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An alternative An alternative explanation: summaryexplanation: summary

MESDC (mostly public) universities have been driven into internationalisation by domestic government policy, which has:

reduced public tuition subsidies for domestic students

continued to regulate domestic tuition fees

deregulated international tuition fees

Internationalisation is a product of government intervention and policy, not a profit-maximising response to overseas opportunities

An alternative explanation: An alternative explanation: summary (2)summary (2)

Evidence for the government interference thesis: The US has the highest proportion of private universities

(no fee maxima) and the lowest percentage (4%) of international students

The UK (13%) and NZ (14%) are all public universities; Australia is the highest (18%), with some private schools but a fee maxima

Lower status universities which have less research and other income (endowments) have been most active in international recruitment and franchising

The highest percentage international enrolments are in high-margin subjects and the lowest in expensive subjects

An alternative explanation: An alternative explanation: summary (3)summary (3)

The demand for international education is driven by:

excess demand for higher education within fast growing developing countries

But:

supply-side response faster than foreseen by West

• Eg, ‘Project 211’, China’s massive investment in its top 100 universities

perceived value of degrees from lower status MESDC universities falling as consumers become more sophisticated (eg, Shanghai Jiao Tong University rankings since 2003)

An alternative An alternative explanation: summary (4)explanation: summary (4)

“If you can get into one of the top 10 Chinese universities, such as Beijing Normal University, Beda, Xinhuan, Fudan, Wuhan etc, then you are set up for life. You will acquire permanent guanxi (a relationship of influence) with the elite of China. You would be very unlikely to give up a place at one of these for a stint at [a foreign] University [like..] XXX or XXX.”

BBC - “Britain and the Chinese “sea-turtles”

The outlook for the The outlook for the internationalisation of higher internationalisation of higher education?education?

The Uppsala model suggests continuing globalisation of higher education

But if the drivers are government policy in the MESDCs and exceeds demand in the developing world, then within the MESDCs: pressure to deregulate domestic tuition fees could reduce the

attractiveness of international students; and

regulatory scrutiny could curb franchise activity

…and in the developing world: increasing domestic supply may cut demand for international

education faster than expected; and

growing market sophistication may reduce demand for lower status universities

ConclusionsConclusions

Globalisation is everywhere

Universities are more internationally integrated than ever before in terms of faculty, students, curricula, etc

Prima facie, universities appear to be internationalising in the same way as businesses

But:

universities have an educational mission and operate in a highly regulated, politicised environment

the rapid internationalisation of the student body for MESDCs over the period 1990-2005 may prove to be a transitional phenomenon, cased by special factors, rather than part of along-term trend