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The Dubai business-school bubble: Portent of things to come?

March 26, 2014

For more information, contact: Ben Haimowitz, +1 (212) 233-6170,

"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 campuses.

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 depression."

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.

Education Bubble"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 teaching facilities.

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 universities."

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 proved irresistible.''

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."

AMLE CoverEntitled "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 January 2015.

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