European Business Schools Expand Their Reach

European Business Schools Expand Their Reach

 

A global approach and shorter paths to a degree have made their M.B.A. programs popular

The Chronicle of Higher Education

May 24, 2002

By KATE GALBRAITH

 

                                                                               Fontainebleau, France

 

The middle of a French forest may not sound like the most obvious place to study business. But for Joyce Kwong, a Hong

Kong native who has spent 10 years on Britain's investment-banking and venture-capital circuit, the decision to seek an

M.B.A. here at Insead was easy.

 

"It's one year, it's a top business school, and it's in Europe," she explains, leaning against a table in the school's snappy bar-cafe. Reflecting the view of many Europeans, she says that American business schools are "U.S.-centric" -- they have a focus on American markets that is not always relevant for those planning to work elsewhere.

 

Ask virtually any Insead student how they came to study here, and being in Europe, or, as often, "going to an international school," will figure near the top of every list. The roughly 600 M.B.A. students here hail from a bewildering number of countries, with the largest nationality groups -- Americans and British -- composing just 10 percent each. Mingling at the bar, or at one of Insead's stream of parties in pretty chateaux, will usually turn up students from four or five continents. Classrooms, where teaching is entirely in English, are filled with a collage of accents.

 

Insead is among a select group of European business schools that are vigorously peddling "internationalism" to try to win an advantage in the competitive market for students. While some American business schools have a healthy proportion of foreign students, Americans are almost always still in the majority. In curriculum, faculty, and especially students, the handful of

European schools regarded as in the elite, especially those on the continent, have each created what Kai Peters, dean of the

Rotterdam School of Management at Erasmus University, in the Netherlands, describes as a "United Nations effect."

 

At Insead, just 9 percent of the students and 16 percent of the faculty members are from France, the home country; at

Rotterdam, the figure for students from the Netherlands is 5 percent; at the International Institute for Management

Development, or IMD, in Lausanne, Switzerland, the number of domestic M.B.A. students is 4 percent. European institutions are close to one another, and students can cross borders and transfer credits easily.

 

In full-time M.B.A. programs in the United States, only 31 percent of the students are not U.S. citizens or permanent residents, according to a survey conducted in the fall of 2001 by AACSB International: The Association to Advance Collegiate Schools of Business, which supports and accredits business schools and has grown more international in scope itself in recent years.

 

"Management education in Europe has made dramatic improvements in the last 10 years," says John Kraft, dean of the

Warrington College of Business at the University of Florida and chairman of the United States-based association. He acknowledges that the European schools "are becoming more significant competition for U.S. business schools." To the irritation of some European academics, business schools in the United States are moving in to claim a share of their expanding market. Duke University's Fuqua School of Business is one of the most visible, having opened a campus in Frankfurt in 1999, although lower-than-expected demand has forced it to make some cutbacks in support staff on that campus last month and could lead to further changes, administrators there say.

 

Paul McKnight, vice president of organizational planning at Emerson Electric, visits business-school campuses in the United

States and Europe to recruit students. At European schools, he says, "You see teams working on a problem or a case – they have a Russian, a Swiss, a German, an Italian, and a Brit working on a problem. That's the way real life is today with globalization." He says that Emerson Electric, which six years ago recruited M.B.A. graduates only from programs in the United States, now also recruits at Insead and IMD, attracted by both the international focus and the longer work experience of many European M.B.A. candidates.

 

At Insead, Werner J. Reinartz, an assistant professor of marketing, recalls a recent class that discussed how Starbucks got started in the United States. French and Italian students argued that the poor quality of American coffee had opened the way for Starbucks, with its fancy European-style espresso drinks. Americans in the course were somewhat startled. "If you raise a concept from a U.S. or European point of view, people will have differences with the concept that you absolutely don't anticipate," says Mr. Reinartz. "Somebody from Europe will say you do something this way, and somebody from Malaysia will say, ‘You can't do it that way, it's the wife who makes the decision.'" The result, students and faculty members say, is an invigorating place to teach or study.

 

Europe Discovers the M.B.A.

 

The European business schools are relatively young institutions in a region where many universities are 700 or 800 years old, and the schools have had trouble establishing themselves. Some of them are private institutions, in a region where public institutions dominate. The M.B.A. and the broader notion of applied rather than theoretical management education are still fairly new concepts for Europe. According to Derek F. Abell, a professor and former dean at the IMD, "It was only after the

Second World War that management education became serious business in Western Europe, whereas by that time it already had a head start of some 30 years in the U.S." Many of the schools that rank well today -- the European measure is usually the rankings of the British Financial Times -- were founded in the late 1950s or early-to-mid-1960s: Insead, IMD, Rotterdam, the University of London's London Business School, and the IESE Business School, at the University of Navarra, in Barcelona.

 

When the schools introduced the M.B.A., continental Europeans tended to dismiss it as a frivolous American export. In

Europe, management education has been the stepchild of economics, and the belief was that studying economics and related disciplines, along with some career experience, was better than an M.B.A. Now the M.B.A. has become more mainstream, particularly in Britain. According to Peter Calladine, educational-services manager for Britain's Association of M.B.A.'s, the number of schools offering M.B.A. or M.B.A.-equivalent degrees there rose from 26 in 1985 to 117 this year. The association promotes the M.B.A. degree and helps those who have one.

 

Continental Europe, however, has not been fully won over. "Generally speaking, the M.B.A. degree is not recognized by the ministries of education," says Martine Plompen, director of communication for the European Foundation for Management Development, a network of institutions interested in management education. Part of the issue is that Europe's degree-granting systems are in flux: In accordance with the 1999 Bologna agreement, endorsed by about 30 countries and intended to bring

European higher education into harmony, the continent's universities are in the process of changing from offering undergraduate programs that last as long as a bachelor's- and a master's-degree program combined in the United States to divided bachelor's and master's degrees. Once the changeover is complete, many observers believe that the number of European M.B.A. programs will expand quickly. Still, Europe's main accrediting agency, Equis, run by the management-development foundation, has accredited 44 M.B.A. programs in Europe, 12 of them in France.

 

European business schools are not a mirror image of their trans-Atlantic counterparts. For one thing, M.B.A. programs in

Europe, except London Business School and a few others, last one year instead of two. Although this means a compressed curriculum, European deans argue that students are not losing out. "Do we deliver less than a two-year program? Probably. Is it half? No -- it's quite a lot more than half," says H. Landis Gabel, an American who is dean of the faculty at Insead. "The question is ... is that second year worth it? Is there added benefit? Yes. Does it match the added cost? No."

 

Students in Europe echo Mr. Gabel, enthusiastically supporting the one-year M.B.A. because it is cheaper and carries less opportunity cost -- they lose less time out of the work force. American deans would dispute this, however. Anjani Jain, a vice dean at the University of Pennsylvania's Wharton School, says he believes that most one-year programs have 60 to 65 percent of the content of two-year American programs. "Classes come fast and furious and the material is compressed," he says.

Extracurricular professional-development activities also get shorter shrift in one-year programs, he adds.

 

A second difference is that European institutions, particularly the top ones, tend to put more emphasis on executive education than institutions in the United States do. IMD has gone the furthest in this respect, keeping only around 90 M.B.A. students at a time, while its executive-education courses attract some 6,000 participants each year.

 

Europe's focus on executive education has one clear cause: money. Lacking the endowments and alumni contributions of long-established American schools, Europe's business schools are forced to keep very sharp eyes on their cash flow. A school's return on executive education -- with courses that can cost more than $5,000 for a week -- is much higher than on full-time M.B.A. programs. At IMD, executive education accounts for 80 percent of revenue, and at Insead, it is more than half. At the Massachusetts Institute of Technology's Sloan School of Management, by contrast, the figure is only 19 percent.

 

Europe's deans claim that the financial constraints make their institutions more responsive to market needs than their counterparts in the United States. "If you're running 85 percent of your annual budget on what you're being paid at the moment, you'd better have a good program to run," says Mr. Gabel of Insead. Still, the emphasis on executive education has rankled some full-time students. One former M.B.A. student at Insead, who asked not to be named, said that executives get first priority around the school, bumping students: "It's a dogfight to find a computer."

 

Seeking to bolster their international credentials still further, many European business schools have embarked on frenzied networking in recent years. Some have teamed up with American business schools to create exchange opportunities. The

London Business School and Columbia University started a joint "EMBA Global" program. Rotterdam has linked up with four other schools for a "OneMBA" program, giving students on several continents access to an M.B.A.

 

Spain's top three business schools -- IESE, Instituto de Empresa, in Madrid, and Esade, based in Barcelona, have all made strong connections to Latin America and its business schools; Instituto de Empresa and IESE now draw 34 percent and 12 percent of students from Latin America, respectively. Perhaps most radically, Insead has built an entire campus in Singapore from scratch, seeking to gain a foothold in the Asian market, but it is competing there with the University of Chicago, which this year started an executive M.B.A. program on the island nation.

 

Where are the Germans?

 

In Europe, not all countries have embraced the "M.B.A. culture." Plenty of German students do receive a "master of business administration" degree -- but they are, for the most part, four-to-seven-year traditional diploms, offered by the public universities. The difference with the one-to-two-year M.B.A. is stark. "The focus of a master of business administration in

Germany is ... an academic career," says Isabell Welpe, who got such a degree at the University of Munich in 1999. "There are no case studies, no practical tools, no networking." As for being international, perish the thought: In Ms. Welpe's class, almost all the students were from the wealthy region of Bavaria. "Being from northern Germany, I was a 1-percent minority," she says wryly.

 

A small but growing number of United States-style M.B.A. programs in Germany are being created, but many observers question the quality of those programs. "M.B.A. programs are springing up like mushrooms after a good rain. There's no agreed-on accreditation process," says Michael Dowling, an American who teaches innovation and technology management at the University of Regensburg, in southern Germany, although he adds that a few of the programs show promise.

 

The Big Chill

 

Why has Germany not warmed to the M.B.A.? The main reason is that Germany's powerful senior professors cling fiercely to the traditional diplom. They oppose replacing the diplom with the M.B.A., or any masters/bachelor's degree combination, as the Bologna accords require.

 

"A good diplom, from a good faculty, is much better [than an M.B.A.]," says Hans Jürgen Drumm, a professor of business management at Regensburg. Politicians, he says, "try to force us to introduce the M.B.A. ... A lot of my colleagues -- nearly the majority -- are against these ideas."

 

This frosty reception has certainly been felt by Duke's Fuqua school, which offers a "cross-continent M.B.A." on its Frankfurt and Durham, N.C., campuses. James A. Gray III, the associate dean for marketing and communications at Fuqua, concedes that the school has lost money on the Frankfurt campus and "may or may not" eventually phase it out -- though this could mean simply relocating to a facility closer to downtown.

 

Mr. Gray insists that the shake-ups at Fuqua do not signify a shift away from Europe or Frankfurt per se, but rather a shift in strategy. Besides a smaller physical presence, Fuqua's future may hold alliances -- Mr. Gray will not say with whom. If so,

Fuqua would fall in with the approach of many top business schools in the United States, which, far from ignoring Europe, have cultivated partners there, with which they conduct exchange programs.

 

The Amos Tuck School of Business Administration at Dartmouth College, for example, has such links with IESE, IMD, the London Business School, and four other European schools. Wharton and Insead are partners.

 

But the 20-month M.B.A. program Duke is selling seems to be something that European students, especially Germans, are reluctant to buy into. "We believed going in that there was going to be more demand for the American-style M.B.A. than in fact there was," says Mr. Gray.

 

"This American-style M.B.A. is still not as understood and valued [in Europe] as it is in the United States."

 

 

Copyright © 2002 by The Chronicle of Higher Education