The role of business schools within universities

For two decades or more, the evolving relationship between business schools and their host universities has arguably brought much greater benefits to the former than the latter. In the future, if universities and business schools want to achieve the greatest impact on the societies that they serve, now is the time for them to re-evaluate their relationship with one another and with the wider business community. 

Having spent the past 15 years in vice-chancellor, deputy vice-chancellor and business dean roles in the UK and Australian higher education sectors, I have observed first-hand the major trends in the industry and the way that these trends have changed the relationship between business school and university. Two of the most significant trends have undoubtedly been the growth in student numbers and international student mobility. 

In the UK and Australia, there has been substantial growth in the enrolment of domestic students, with participation rates in both countries climbing to more than 40 per cent. Yet this growth has been outpaced by the growth in the enrolment of international students, mainly originating from China. 

In Australian universities, more than 25 per cent of the student population now comes from overseas, while in the UK the figure is 20 per cent. A major attraction of these international students to universities is that their fees are typically one and a half times or double those of their local peers – sometimes even more. At a time when fees or government funding for local students has not been matching cost indices on a per student basis, international students have provided a vital high-margin revenue stream for universities. 

The issue is that more than 50 per cent of international student demand has been for business degrees, so universities, in spite of a desire for greater diversity in disciplinary mix and country of origin, have admitted larger numbers of international business students each year.  

Compared with other disciplines, business has seen high market growth locally and internationally; it can attract a higher student fee in a deregulated market based on expected graduate earnings; and it is perceived to be inexpensive to teach and highly scalable. 

As such, business schools have become the reliable “cash cows” for vice-chancellors, enabling them to fund ambitious growth plans in other lower-demand and lower-margin disciplines, as well as costly research that enhances reputation. Business schools have underwritten much of the investment in new facilities and initiatives.  

But it was not always so. Many leading universities have only acquired business schools within the past 25 years, subsequent to the rapid growth in enrolments. And there were many leading examples of business schools that sat outside universities, or maintained a strong “arms-length” separation. In many cases, these independent or quasi-independent schools have been acquired, merged or integrated into the mainstream of established universities. 

In Australia and the UK, a key factor has no doubt been the rise of business as an undergraduate degree or major. Demand from students to study on an established university campus, with all the benefits of the student lifestyle and facilities on offer, as well as the illustrious university brand, while pursuing a professional degree leading to a lucrative career, has been an appealing mix. 

The resulting reliable revenue streams has provided the capacity for universities to hire the leading business academics and develop prestigious programmes at postgraduate level, in research and in executive education. 

However, the academic establishment has been reticent to accept business as a prestigious academic discipline. For academic traditionalists, business “research” had too strong a focus on understanding good business practice than on theory and scientific discovery. 

The response of business academics and university-based business schools in the last generation has been to seek to overcome this lesser esteem within the academy by moving away from a focus on business as a practice-based discipline to one that is more academic in its orientation. This is evidenced by the extent to which the publications that are most highly valued in research assessment exercises are often those read exclusively by other academics rather than by business leaders or consultants.

Yet these efforts have been largely ineffective. Business schools are not able to compete with schools in the physical, life or medical sciences on the basis of research income or the volume of scholarly articles. Nor should they; society does not require the same amount of investment in research in accounting as it does in medicine. 

So, what is the direction for business schools? The opportunity is likely to be the trend towards greater recognition of research impact beyond its academic impact. Research impact is a natural strength for business schools and their engagement with business often opens the doors for engagement from other disciplines in the university.

A refocus of research on business practice rather than the academy could prove to be the saviour of both business schools and their parent universities.

Because business schools are the most commercially attractive segment of higher education, they have become the most competitive and the most internationalised. With promises of well-paid careers, their students have a greater appreciation of return on investment and universities have taken this opportunity to set fees accordingly. This higher level of student expectation coupled with competition between schools has spurred more innovation, with business schools at the forefront of the sector in terms of online education, executive education and new programme structures and modes of delivery, as well as in the engagement with external stakeholders through advisory boards. 

If vice-chancellors are seeking to understand how universities will evolve in the next decade, they may do no better than by looking at where business schools are today.

Alec Cameron is vice-chancellor and chief executive of Aston University. This article is an excerpt from Rethinking Business Education, a collection of thought pieces produced to celebrate 25 years of the Chartered Association of Business Schools.