International Branch Campus: Framework and Strategy

Available online at www.sciencedirect.com ScienceDirect Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 Contemporary Issues in Business, Management and Education 2013 International branch campus: Framework and strategy Egle Girdzijauskaitea*, Asta Radzevicienea a Vilnius Gediminas Technical University, Sauletekio al. 11, LT-10223, Vilnius, Lithuania Abstract Internationalisation of higher education institutions (HEIs) is considered to be a top priority in institutional strategy development. Institutions are enhancing internationalisation to increase the quality of education and research, to expand the scope of these activities, to overcome the rivals, position themselves internationally, and diversify the income. The business models are increasingly transferred into HE practices. An international branch campus is one of the most risky and unexplored entry modes to international markets in higher education and the topic of interest around the globe, however little knowledge has been gathered about this internationalisation mode. The aim of this paper is to elaborate on the motives and rationales of establishing a branch campus abroad, and discuss this strategy as a way to create international presence of the HEI. © The Authors. Authors. Published Published by by Elsevier Elsevier Ltd. Ltd. Open access under CC BY-NC-ND license. © 2014 2014 The Selection and peer-review under responsibility of the the Contemporary Contemporary Issues Issues in in Business, Business, Management Management and andEducation Educationconference. conference. Selection and peer-review under responsibility of Keywords: higher education institutions management; internationalisation; international branch campus; networking. 1. Internationalisation and business models transfer to higher education Higher education has been experiencing a great transition around the world for the last two decades. The changes are boosted by the globally increasing demand for higher education, emergence of mass access to information channels, the changing relationship between the universities and the governments, the emergence of new learning and teaching technologies. Higher education takes on new role, functions, and the cooperation structures are changing. Universities are embedded in the same socioeconomic environment as business organisations: Market saturation, hyper competition, raising resource costs, global spread of best practices, power of global brands, growing expectations of stakeholders are the new realities the universities are facing (Amaral et al., 2003). * Corresponding author. Tel.: +37062807493 E-mail address: egle.girdzijauskaite@vgtu.lt 1877-0428 © 2014 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license. Selection and peer-review under responsibility of the Contemporary Issues in Business, Management and Education conference. doi:10.1016/j.sbspro.2013.12.874 302 Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 Under these circumstances HEIs increasingly behave as business organisations - international orientation is becoming a premise of their competitiveness. According to the statistics, the target group and demand of education has never been so high in Europe and globally. Despite increasing competition, it resulted in growing numbers of providers and participants of international education, and new modes of cooperation. New kind of players are emerging in the education sector – public and private research and training organisations and genuine business companies that are also becoming involved as competitors providing the services similar to HEIs. Moreover universities, especially those who have strong international reputation, seem to be increasingly run like multinational companies. In order to succeed, HEIs shall need to develop perspective international business models in the coming decades to cope with changing environment and rivalry. Internationalisation of activities is inherent part of contemporary university, and is becoming prerequisite, condition and a development tool for the quality of university operations. Internationalisation in higher education is used now as a concept which encompasses various forms of international cooperation between institutions, groups of institutions or even higher education systems, student and staff mobility across national borders, and cross-border ‘transnational’ delivery of programmes (Radzeviciene and Girdzijauskaite, 2012). The cooperative structures serve as a basis to competitive advantage, e.g. consortia’s, networks, associations of HEIs. International networks of higher education institutions for its broad spectrum of activities, is now one of the most promising forms of international cooperation and the way to set the foot and create international presence in foreign country. It seems that an attitude - the more partnerships, the better for the institution - is vanishing. Every partnership adds liabilities to institution and requires constant maintenance of institutional relationship; every partner is expected to contribute to the value chain (Radzeviciene and Girdzijauskaite, 2012). This creates not only advantages, but also dependency on partners which might be limiting the development of joint activities. Nevertheless the networks are widely used to expand internationally (branch campus establishing is still respectively rare practise). Another, more aggressive and risky venture – branch campus establishment is growing in number and interest. However a number of issues are open to research and establishing of branch campus is still respectively rare practise. If we compare networking and branch campus as two separate foreign market entry modes, we might refer to networking as to the soft approach of internationalisation, and branch campus – the hard approach of international entry mode which in business life could be compared with commercial presence of a company in international market. Both ways are the most discussed internationalisation modes among researchers and practitioners. Both serve the purpose to establish presence in a foreign country. But these two modes are different extremes of the strategic choice line targeted at international entry. Networking supposes relatively low investment, low risks, but also relatively limited presence in international market and therefore limited benefits. Branch campus as internationalisation tool is associated with high investment, high risks, but potentially high benefits. The latter internationalisation mode is definitely very tempting for the HEIs seeking to increase the income from international operations, however proper assessment of risks is a hot topic to discuss. In this paper we analyse the rationales to establish international branch campus in comparison to widely used networking based internationalisation mode as the most recently emerged internationalisation modes. We analyse possible challenges of establishing a branch campus in order to encourage institutions to re-examine institutional capacities when choosing branch campus as an international entry mode. 2. Networking Networking is highly relevant as management tool to institutions actively developing international activities in a limited resource situation, (which stands for many European HEIs), facing the need to expand geographical presence, balance the risks, share the resources, and transfer the competences. The network approach focuses on the relationship of the organisation and the benefits derived externally i.e. opposed to the view based on internal evolution of a firm's knowledge and resources. Major principles of networking are valid in international consortia, and thematic networks of HEIs: flexibility; capacity to transform; project-based nature of activities; therefore relatively short term focus for single activities; decentralised management by groups, binary logics of inclusion and reciprocal commitment; trust; shared resources; small group Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 advantage; borderless systems (Castells, 2000; Beerkens, 2004; Radzeviciene and Girdzijauskaite, 2012). Networking research might be especially relevant for institutions – latecomers in international educational market, which building up their international presence. 2.1. Motives for networking Resource sharing is one of the most important motives for networking in higher education. International partnership is not only a tool to obtain strategic resources, but also to decrease some transaction costs. Another resources related reason to be involved in a network or consortium is a group representation: often public funding is assigned on condition that an activity will be carried in international partnership. Partnership facilitates a chance to change and develop resources of HEI. Organisations tend to exploit existing opportunities to generate and develop new combinations of resources to sustain its competitiveness in the future. Mutual learning is crucial to network partners bringing the benefits of learning through know-how, best practices or technology transfer. Network partners have quite immediate access to the corporate knowledge of the network, which could be interpreted that the level of trust among partners is high and necessity to have all partners contributing into activities is basic work principle. Forming linkages and maintaining viable relations with the most influential players in a network helps to access downstream information leading to new activities. Networking is a powerful tool to strengthen position against competitors. The reputation, influence, know-how of network leaders shared within the network, can significantly increase competitiveness of every single partner: not only because of learning effect and access to valuable resources of partner but also because of hallo effect around globally recognised partners (Radzeviciene and Girdzijauskaite, 2012). In this way international partnership becomes a tool to increase local competitiveness of HEI. For these particular reasons internationalisation proves to be powerful instrument to strengthen position against the rivals containing respectively low risk and rewarding benefits. 2.2. Limitations of networking activities When discussing networks, it must be pointed out that significant dependence on the partners creates the most limitations of this activity: getting the access to the network, gaining the influence, knowledge asymmetry, and some other issues must be concerned before making networking choice. Network of HEIs is a group of organisations access to which is restricted by the agreement of other members (Beerkins, 2004). Therefore the access to the network is the main barrier. Positioning in the network and gaining influence is not less complicated than accessing it mostly because of the fact that the partners have long standing cooperation experience, and the power distribution is already established. Depending on how different or similar the partners are, there might be a high level of knowledge, resource, and power distribution asymmetry between latecomers and mature established HEIs. The main means of knowledge accumulation in interorganisational cooperation are absorbing knowledge from a partner and creating new knowledge by interacting (Vialle, 2011; Girdzijauskaite and Radzeviciene, 2013). Absorbing partner’s knowledge is more likely used by latecomer institutions at the beginning of their catch-up process. However, latecomer and mature institutions tend to have different views on knowledge absorption and imitation: for a mature institution knowledge is a resource to be protected as a competitive advantage source (Vialle, 2011), whereas according to a latecomer's view, all resources including knowledge should be accessed and replicated (Mathews, 2002; Vialle, 2011). This attitude might not satisfy the giving partner. Partnership with strong, internationally recognized players may help to reach competitive advantage against other competitors. Although linkage and learning from partners is possible only if the HEI has specific asset to share in exchange. Ideas, access to local market, infrastructure, local support available for joint activities could be an example of the assets to be offered in exchange to know-how, education products, and brand of leading HEIs (Radzeviciene and Girdzijauskaite, 2012). While the financial and reputational risks of networking are respectively low comparing to that of other modes of foreign market entry, the benefits are split as well. This makes network a not so risky, hence not so rewarding mode 303 304 Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 of foreign market entry. This condition is seen as a drawback for mature institutions however serves well for the latecomer HEIs when considering the choice of international entry modes. 3. International branch campus Branch campus is rather new, though quickly rising phenomenon in transnational education. Wilkins and Huisman (2012) defines international branch campus as an educational facility that fits three major attributes: • owned, at least in part, by a foreign institution; • operating under the name of the foreign institution; • students receive face-to-face instruction to achieve a qualification bearing the name of the foreign institution). The Commission on Institutions of Higher Education (CIHE) provides a more policy oriented definition: “a branch campus is geographically removed from the main campus, offers 50% or more of an academic program leading to a degree, certificate or other recognized credential, is permanent in nature, has its own faculty and administration, and has its own budgetary and hiring authority”. Depending on the target market a branch campus can be of the following types: • Education: having undergraduate students as the main target. • Research: preparing graduate and PhD students. • Education&research: split attention to all three study levels. Depending on partnership form branch campus can take three modes: • Branch campus as a subsidiary with certain operations individually offshored to a foreign country; • Joint venture, in which a bilateral or multilateral merge of higher education institutions takes place; • University-business venture. Branch campus phenomenon reaches to 15 years ago, hence has been little explored by scholars and policy makers. It should be noted therefore, that the definitions in theory illustrate perfect conditions; in practise every case is individual and not always fits the theoretical approach. In the last few years there was significant growth in number of BCs with 43% increase since 2006 (Becker, 2009). In 2006 there were around 82, in 2013 – 188 international branch campuses around the world (C-BERT, 2013). The most popular destinations for the establishment of the international branch campuses are United Arab Emirates (UAE), China, Singapore and Qatar. The largest source countries are the United States, Australia and the United Kingdom (Becker, 2009; Wilkins and Huisman, 2012). However, 188 branch campuses having a total of 29000 HEIs around the globe respectively take only a few to offshore their operations. Not to say a few strongest, but a few pioneering and proactive. Establishing a branch campus is considered to be entrepreneurial activity. Income generated from transnational activities enables the financial diversification of an institution and lower dependency on local government allocations. However, offshoring the educational services require substantial investments and effort, therefore, even though the international branch campus is on the rise, majority of universities have deliberately chosen not to go that direction or have not considered such option at all. This has triggered the interest of practitioners and researchers. In this paper we discuss the rationales of higher education institutions as well as barriers to undertaking the branch campus initiative. 3.1. Motives Higher education institutions in many countries are considerably influenced and protected by the government. Sometimes branch campus establishment needs special agreement (approval) both from local and host country's government. Therefore, talking about the driving forces for international branch campus it is relevant to discuss the advantages for both the host and the providing country. Financial, reputational and academic advantages are the main motives for both sides (Shams and Huisman, 2012). Talking about the host country, branch campus established helps to reduce the brain drain, as part of the students aiming for international degree are able to stay “at home”, support income generation, and increase technology transfer (Shams and Huisman, 2012). A new “brand” entering host country's market raises the local Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 competition and therefore boosts the quality of education and research in the region. In Qatar's education hub, for instance, the critical factor for selection of foreign HEIs to be invited into the hub is internationally recognised curriculum and research in disciplines that are essential to expanding Qatars range of higher education supply (Knight, 2011). As for the providing country, it benefits by generating extra income, opportunity to exploit the foreign markets, and diversify the education and research portfolios (Becker, 2009; Shams and Huisman, 2012). The advantages mentioned above encourage the government in a country of origin to support universities for branch campus establishment. Increasingly entrepreneurship and internationalisation are considered as top priorities by HEIs, and many governments support and encourage initiatives of education export. However, the circumstances determining the support from host country public authorities are unstable, influenced by politics, national education strategy, and local competition. Apart from government incentives higher education institutions have various reasons to consider a branch campus, and these reasons can be ranked similarly to country benefits: academic, financial, reputational. Academic rationale to internationalise the activities by establishing a branch campus is one of the most important for HEIs. First of all, organisation is learning through new experience and know-how, new educational services are developed, especially through the adaptation of the old ones to the peculiarities of a host country. Secondly, if talking about the stakeholders, expanding the circle of service users, attracting potential international students and staff, especially through graduate study programmes, and internationalising the overall student body of a university is a very important motive for branch campus establishment. Many scholars argue that enhancing the reputation is one of the main rationales for establishing a BC (Marginson, 2006; van Vught, 2008). It is claimed that establishing a branch campus abroad has a significant positive effect on institutions prestige and image. Universities using their brand to enter new markets illustrate the use of eclectic paradigm, consisting of three pillars: ownership advantage, location advantage, and internalisation advantage (Dunning and Lundan, 2008). A university, that has offshored its operations abroad similarly to a business firm seeks to exploit its ownership advantages (Dunning and Lundan, 2008; Shams and Huisman, 2012), such as brand name, knowledge, intellectual property, reputation. The better the use of ownership advantages, the better will be the location advantages exploited. Another rationale for transnational activities in higher education is income diversification. Revenues are generated through tuition fee, research commercialisation, new investors attracted by a branch. One of the early initiatives was Monash University (Australia) which established branch campuses in 1999 in Malaysia and South Africa in order to reduce dependence on state funding (McBurnie and Pollock, 2000). “Higher education by large is still locked in national systems, with only a few very courageous universities venturing at transnational levels.” says M. Van Rooijen, CEO and Rector of London School of Business & Finance. 3.2. Limitations of branch campus establishment Several public declarations from UK and US universities about declining the idea of implementing branch campuses have raised the interest of the motives that urge the negative stand against opting for a branch campus. Universities are increasingly being compared to business firms in media and research, scholars are applying business theories to higher education research. University establishing a branch campus is compared to a business firm entering new markets (Shams and Huisman, 2012). Thus we can assume that similar managerial challenges arise for a university when entering a foreign market: resource and product adaptation related. One of the main reasons sustaining from opting a branch campus is high financial risks. Implementing and sustaining a branch campus in foreign country requires substantial investment and there is a high risk of financial losses. As an example could be the withdrawal of the University of New South Wales from Singapore, as it lasted for two months and caused 38 million US dollar losses (Becker, 2009; Wilkins and Huisman, 2012). Recently the graduate film and creative arts school in Singapore that is a branch of New York University’s Tisch School of the Arts has just announced that it will close (likely in 2014) because of financial issues. Another resource related challenge is staff. When offshoring the operations abroad a certain number of faculty must be assigned. It takes substantial input of human resource to adapt and deliver the curriculum, organise the 305 306 Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 equipment, etc. (Altbach, 2010). Travel expenses and higher wages arise as additional costs (Ennew and Yang, 2009; Gill, 2009). Local professionals contributing to the teaching process could be chosen as an alternative; however it has to be considered that the quality of teaching may be impinged to some extent (Ziguras, 2008). However, the host country might set requirements on the percentages up to which local stuff has to be employed in a branch campus. University managers have to come to decision and find a rational balance on local and home staff policy. Product adaptation challenges are mainly related to the curricula. In some cases it has to fit certain requirements in a host country. Many scholars argue that it is a huge challenge for a providing university to adapt the curricula to local norms and maintain the identical content, quality and degree for both home and across the border students (Li and Baalen, 2007; Prowse and Altbach, 2010; Goddard, 2010; Shams and Huisman, 2012). The mismatch is possible between the universities study program and local cultural norms. However local students are attracted by the foreign institution and expect to be treated exactly the same as home students and provided with identical materials. Moreover, one must consider, that such a move receives a lot of attention and is vastly visible, therefore the risks of reputational damage should be taken into account. A number of scholars argue that top managers often underestimate the risks of branch campus initiative (Shams and Huisman, 2012; Wilkins and Huisman, 2012). 4. Risk reducation strategies High Low Low Institutional difference in a host country The minimisation of risks are one of the most challenging tasks for the institutions when elaborating the foreign market entry strategy and considering branch campus as possible entry mode. Phillips et al. (2009) suggested a conception of institutional distance that provides four possible strategies for HEIs to enter the new market depending on the institutional difference and institutional uncertainty. These findings could be transformed into a matrix with two axes: institutional difference in host country and institutional uncertainty in host country. Institutional uncertainty in a host country High Adapt Avoid Moderate risk, complexity, effort High risk, complexity, effort Establish international branch campus, but adapt structures and processes to suit institutional context in host country Do not establish international branch campus in this host country – the risks are too high Transfer Hedge Low risk, complexity, effort Moderate risk, complexity, effort Establish international branch campus using the same structures and processes used at the home campus Establish international branch campus but as a joint venture with a local partner or obtain funding and assurances from host country government Fig. 1. Transnational strategies for a university based on institutional difference and institutional uncertainty (compiled by authors) It is illustrated in Figure 1 how a university could assess internationalisation options for overseas expansion. If the institutional distance between a home and a host country is low, and the institutional uncertainty in the host country is low, then a university can transfer the operations to a branch without major changes; same processes can be adapted and the same programmes can be delivered (Wilkins and Huisman, 2012). This mode for instance is applicable for American HEIs having or about to have branch campuses in Western Europe. If institutional differences are high, but the uncertainty in a host country - rather low, then the branch campus can be established, however certain obstacles arise because of the institutional differences and it is strongly Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 recommended to execute a careful revision and adapt structures and processes to the institutional context of the receiving country. The situation of low institutional differences, but respectively high uncertainty is likely in developing countries, because the institutions in a host country are less developed or evolving rapidly. In such setting risk reduction is accessible through a local partnership – then, a university is able to convey an image of legitimacy, and when the strategy is seen to be successful, it is likely to be imitated by other universities (Wilkins and Huisman, 2012). An example of a respective strategy is well applied in branch campuses established in Malaysia between 1996 and 2007 between foreign HEIs and local companies (Wilkins and Huisman, 2012), where the companies provided HEIs with market intelligence, capital and physical infrastructure, while HEIs took the lead in intellectual and educational components. If both the institutional differences and uncertainty between home and host countries are high, then the institutional distance is high. Thus high uncertainty and difference results in a vast of risks and the effort required might not be worth the possible benefits. In India, for instance, there is a huge undersupply of higher education, yet the complex regulatory frame makes the country very unattractive to foreign universities seeking overseas expansion (Shams and Huisman, 2012; Wilkins and Huisman, 2012). Analysis of the risk reduction strategies showed that when the uncertainty is high, joint venture with a local institution is recommended. For the universities that entered the education market later then their rivals, joint venture should be considered as less risky entry mode for HEI. It was mentioned earlier that the main motives for a branch campus establishment are academic, reputational, and financial while the biggest challenges are resource and product adaptation related. The main difference between branch campus and joint venture is finance related. In other words, the reputational and academic motives are just as important, and the product adaptation risks remain equally relevant in both cases, however the financial drivers and financial risks shift. As there is one service provider in a branch campus all liabilities and all benefits are owned by a single institution. In a case of joint venture, both liabilities and benefits are split in a number of partners, the risks are also shared. Partnership with local players is important to gain local market knowledge which is crucial to be successful in education activities. Interpreting the Uppsala theory which explains how business firms gradually intensify their activities in foreign markets and analysing standard sequence of entry modes defined in Uppsala model, we might conclude accordingly that indirect export is the first step before direct export in business, and less risky modes could be chosen before more aggressive ones in higher education internationalisation. For instance, following the latter logic in our case, joint venture is a step before branch campus. However, if an institutional presence in a form of joint venture is established with another HEI, it is hardly likely it will be able to turn into independent branch eventually, since the agreement is usually long term. University-business partnerships on the other hand are less likely to be long term, and therefore might be a choice to consider if aiming at the full ownership in the future. 5. Discussion and closing remarks Forms of international cooperation between institutions and foreign market modes vary accordingly to the scope of possible risks, benefits, and the distribution of responsibilities between partners. International networking is considered to be traditional, more secure, less risky, “soft” approach to internationalisation, whereas branch campus is more risky and “hard” approach to internationalisation. While branch campus is rich with benefits, this mode requires far more resources and commitment than networking. Some forms of cooperation applies for the institutions willing to reduce the risks (networking), other – for more aggressive market players (branch campus). An institution must evaluate its needs, capabilities, resources, and ability to gather market knowledge before choosing a certain mode. It should be pointed out that for mature HEIs having long standing national brand of education branch campus might have a huge potential, which is not exploited if declining on the latter initiative. For the latecomer universities from the countries with unclear international reputation of education system despite growing attempts branch campus establishment is a very risky decision and perhaps exceeds the institutional capabilities. 307 308 Egle Girdzijauskaite and Asta Radzeviciene / Procedia - Social and Behavioral Sciences 110 (2014) 301 – 308 However, theoretically it is possible and there is a less risky approach to this. Joint venture can be used as a way for HEIs that have entered the education market later than their rivals and therefore don't have strong international reputation in dense local market. HEI-HEI or HEI-business partnership in a form of joint venture holds its own risks that must be managed in order to achieve effective collaboration, however the risks are considerably lower than that of establishing a branch campus independently. Establishing a branch campus might be a way to overgrow oneself, significantly strengthen the international presence, not necessarily following the incremental step by step approach. If the management of HEI succeeds to forecast the emerging educational market in its early stage – where the competition is modest, decision to enter the market coincides with the growing potential of this particular market, demand coincides with the market growth - it might serve as a powerful kick-off for university international expansion. References Altbach, P. G. (2010). Why Branch Campuses May Be Unsustainable. International Higher Education, 58, 2–3. Amaral, A., Meek, V.L., Larsen, I.M. (2003). The Higher Education Managerial Revolution? Kluwer Academic Publishers. ISBN 1-4020-15755. http://dx.doi.org/10.1007/978-94-010-0072-7 Becker, R. F. J. (2009). International branch campuses. London: The Observatory on Borderless Higher Education. Beerkens, E. (2004). 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