The Dubai business-school bubble: Portent of things to come?
March 26, 2014
For more information, contact: Ben Haimowitz, +1 (212) 233-6170, firstname.lastname@example.org
"How is it possible that the world's top business schools
judged the market so badly at the same time and collectively
invested in activities that, in retrospect, were far from
economically rational but instead more closely resembled euphoria,
mania, and panic?"
That is the question asked by the authors of a paper in the
current issue of the journal Academy of Management Learning and Education. Their study probes
the educational boom-and-bust in the Middle Eastern emirate of
Dubai between 1995 and 2008, when the emirate was the world's
hottest spot for the establishment of international business-school
What took place in Dubai, the article asserts, was something
business faculty spend considerable time writing and teaching about
but which they had little success in avoiding - the making and
breaking of a bubble. The Dubai business-school bubble, the authors
conclude, exposed a disturbing eagerness of schools to emulate the
corporate sector in a way that is at odds with their traditions and
that puts their reputations and finances at risk.
Comments Kimmo Alajoutsijärvi of Finland's Jyväskylä University,
who co-authored the article with his business-school colleagues
Katariina Juusola and Juha-Antti Lamberg, "The lesson of the Dubai
bubble is that business schools need to get back to being students
and critics of the corporate world not participants in it.
Otherwise, Dubai could turn out to be a portent of a sector-wide
At its peak, before the world economic crisis, the study
explains, Dubai hosted the opening of more international branch
campuses (IBCs) than any other place in the world. Twenty-five
business schools from 11 countries, almost two a year, opened their
doors there between 1995 and 2008, including 10 from the
Financial Times' list of the top 100.
"Were it not for the world financial crisis, more would likely
have followed," says Prof. Alajoutsijärvi. Fifty-four universities,
he notes, were on the waiting list to open IBCs when the economy
went into free fall. Some schools went bankrupt, and many others
were forced to exit or downsize their operations, leaving even
those schools that had benefited from the boom with half-empty
The question of how this was possible assumes special
pertinence, the study argues, coming on the heels, as it did, of a
similar IBC bubble during the 1980s, when American universities
flocked to Japan, eager to take advantage of what then seemed the
most dynamic economy in the world. Of the 30 IBCs opened
there, one remains today.
Yet, only a little more than a decade later, in the words of the
study, "institutionalized modes of thought permitted no room for
the suspicion that a country with a population of 1.7 million could
not absorb 50 universities." It cites the opinion of the dean of
one of the Dubai schools that the business schools' "main strategy
is to slavishly and obsessively mimic whatever seems to be going on
at the current point in time."
In the past, decision-making in business schools was in the
hands of the faculty, evolving slowly and incrementally in a
pattern that the study describes as "active inertia." More
recently, an administrative professionalization process has "left
faculty members without a significant voice in matters such as
investment decisions, even in controversial countries."
Adds Prof. Alajoutsijärvi, "Traditional bottom-up organizations
have become top-down hierarchies that are similar to their
corporate counterparts. Schools commonly harbor
globalization-related ambitions and economic aspirations that are
similar to those of corporations and carry much the same risk.
Global operations are generally run by separate, for-profit,
semi-autonomous units that are major sources of cash for their
The article describes how in the 1990s, the government of Dubai
conceived a long-term vision of itself as a knowledge society, with
the aim of attracting ambitious, education-hungry individuals from
across the Middle East and beyond. One business professor cited in
the study observed that "after one or two business schools, there
was a sudden mushroom effect…From the international perspective,
[the schools] saw how easy it is to make money here… no regulation…
no quality standards…They realized that to operate here is a
hundred times better than operating in their national market."
"In retrospect, it is not hard to see how this particular bubble
happened," says Prof. Alajoutsijärvi. "As improvements in the
developing world have created an unprecedented global demand for
management education, the number of new business schools has become
so staggering that accreditation agencies can only estimate that
there are some 12,600 of them around the world. An open door to an
oil-rich emirate intent on becoming a global educational center
Yet, Dubai, he believes, may be merely an early warning sign of
a wider problem in higher education in general and business
education in particular.
Most at risk, the professor says, is the United States, "where a
number of developments suggest a late-stage bubble." He cites a
rapidly rising total of student loans, a growing tendency of state
governments to shift cost burdens from taxpayers to students and
their families, rising unemployment among graduates, and growing
resistance from parents and students to prices increasing at
several times the rate of inflation.
A recent article in The Economist, he notes, blamed the
gloom pervading the business-school sector today on the continuing
power of the "academic guild," citing such perennial problems as
overemphasis on research at the expense of teaching and the
questionable practical value of much of that research. "Certainly
these problems are real," the professor says, "but it would be a
mistake to overlook what Dubai conveys about the waning power of
the academic guild in a new era of corporatization in universities.
While this trend is university-wide, business schools have been in
the forefront, even as their expertise in corporate folly should be
leading them to pump the brakes."
In sum, he concludes, "it is time for business faculty to focus
its formidable critical intelligence on the dangerous bubble that
higher education is now confronting. It is time for the faculty to
exert its traditional powers to prevent a real depression."
Entitled "Institutional Logic of Business Bubbles: Lessons from the Dubai Business School Mania," the article is in the March issue of Academy of Management Learning and Education. This peer-reviewed journal is
published quarterly by the Academy, which, with about
18,000 members in 115 countries, is the largest organization in the
world devoted to management research and teaching. The Academy's
other publications are Academy of Management Journal, Academy of
Management Review, Academy of Management Perspectives,
and Academy of Management Annals. A sixth
publication, Academy of Management Discoveries, is currently accepting submissions and will begin publishing in