The document discusses whether higher education is truly internationalizing. It summarizes the Uppsala Model of internationalization where universities progress from exporting to franchising to foreign investment. While universities appear to be following this model, an alternative view is presented where internationalization is driven more by government policy constraints on domestic tuition than commercial profit-seeking. Demand from developing countries is growing due to economic and demographic factors, but domestic supply is constrained, leading students to seek education abroad.

1. Is higher education really
internationalising?
Professor Nigel Healey
2nd Asia-Pacific Professional Leaders in Education Conference
July 14, 2006

2. Overview
 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

3. Universities as
international 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

4. Universities as
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?

5. The Uppsala Model of
Internationalisation
 Sequencing model drawn from the literature
on the internationalisation of business:
 Exporting
 Licensing production
 Joint ventures
 Sole Ventures Collectively sometimes
called the ‘third wave’
 How does higher education fit this model?

6. Universities 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?

7. Universities as exporters
(2): how big?
Table 1: International Students in On-shore Higher Education (millions)
% Change
2000 2001 2002 2003 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

8. Universities as exporters
(3): the MESDCs
Table 2: International Students in On-shore Higher Education (2005)
New United United
Australia Zealand Kingdom 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

9. Universities as exporters
(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% OECD Education at a Glance
Source: 100.0% 100.0% 100.0%
2005

10. Universities as exporters
(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

11. Universities 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

12. Universities as franchisers
(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…

13. Universities as franchisers
(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

14. Universities as franchisers
(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

15. Universities as franchisers
(5): how big in Australia?
Table 6: Number of Australian Off-Shore Programmes
Cumul
Pre- -ative
2000 2000 2001 2002 2003 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

16. Universities as foreign
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

17. Universities as foreign
investors (2): joint ventures
Table 7: Stand-alone Branch Campuses in Malaysia and Singapore
Malaysia Singapore
Foreign Partner Estab. Foreign Partner Estab.
Monash University, 1998 INSEAD, France 2000
Australia
University of 2000
Nottingham, UK

18. Universities as foreign
investors (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

19. Universities as foreign
investors (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’

20. A business perspective on
universities’ 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)

21. A business perspective on
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)?

22. An alternative explanation:
the 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

23. An alternative explanation:
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

24. An alternative explanation:
the supply-side (3)
 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

25. An alternative explanation:
the supply-side (4)
 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

26. An alternative explanation:
the 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

27. An alternative explanation:
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

28. An alternative explanation:
the demand side (3)
Figure 1: IDP Estimates for Global Demand for Higher Education

29. An alternative explanation:
the demand side (4)
 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)

30. An alternative explanation:
the demand side (5)
Figure 2: IDP Estimates of Demand for International H.E.

31. An alternative
explanation: 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

32. An alternative explanation:
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

33. An alternative explanation:
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)

34. An alternative
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”

35. The outlook for the internationalisation
of higher 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

36. Conclusions
 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