Duke to NYU Missteps Abroad Lead Colleges to Reassess Expansion

Duke to NYU Missteps Abroad Lead Colleges to Reassess Expansion

For two decades, U.S. universities have raced to build campuses abroad to burnish their reputation and attract foreign students. Now, controversies and stumbles at high-profile projects have led some to reconsider expansion. Among the setbacks: faculty dissent at New York University and Yale University, construction delays at Duke University’s campus in China and lackluster enrollment at Persian Gulf outposts. Politics in Russia are jeopardizing the success of Massachusetts Institute of Technology’s project in Moscow.Those experiences, together with the growth of online learning, where a professor in Chicago can easily connect with students in Mumbai, are giving colleges pause, said Ezekiel Emanuel, vice provost for global initiatives at the University of Pennsylvania. Like Harvard, Columbia and Stanford universities, Penn has chosen to establish small study centers in cities like Beijing rather than invest in campuses. Penn is also a partner of free online course provider Coursera Inc.

“We are fundamentally a knowledge institution, we are not fundamentally a real estate institution,” Emanuel said. “In this day and age, the idea that you are going to double down on real estate seems a little nutty.”

There are more than 80 international branches of U.S. universities abroad, an eightfold increase from 1990, according to Jason Lane, an associate professor at the University of Albany in New York, who studies higher education. That growth has slowed as universities better understand the risks involved, he said.

Staking Claims

“It’s definitely a maturation in the thought process,” Lane said. “The 2000s were a bit of a Wild West period: everyone was going out and staking their claims. Now colleges are being a bit more thoughtful.”

U.S. universities, particularly ones that are highly ranked, are coveted as partners by foreign countries and often receive subsidies for construction, rent or other costs.

While dozens of campuses have opened without incident, others, particularly in recent years, have been marred by disputes and obstacles.

Duke’s college in Kunshan, China, originally set to open in 2012, has been bogged down by construction setbacks, and is now slated for 2014. Duke also scaled back planned business-school courses after faculty expressed concerns about low demand.

“That was something that made the faculty much more comfortable,” said William Boulding, dean of Duke’s Fuqua School of Business, in Durham, North Carolina. “You don’t want to put the business school or university in a position where you have unrealistic financial expectations.”

Startup Costs

Duke is spending an estimated $8 million on startup costs and $6 million annually over seven years at its China outpost while the city of Kunshan is spending an estimated $260 million to build the 200-acre campus.

While the opening delay is unfortunate, “it’s given us more time to be thoughtful about what we’re going to do,” Boulding said.

Domestic politics can get in the way, too. Cambridge, Massachusetts-based MIT is being paid $300 million by Russia’s government to help develop the Skolkovo Institute of Science and Technology as part of a $2.7 billion innovation hub on the outskirts of Moscow.

Its viability is threatened by a feud between Skolkovo’s founder, former Russian President Dmitry Medvedev, and current President Vladimir Putin, who vetoed special benefits for the project’s technology park last year. In April, the offices of the foundation overseeing the university were raided by government agents as part of a corruption probe.

‘Actively Engaged’

MIT spokesman Nate Nickerson declined to comment on the political situation, saying only that the university is “actively engaged” with its partners at the Skolkovo Foundation and Skoltech.

“We are enthusiastically pursuing the work of helping to build this new university,” Nickerson said in an e-mail.

At NYU, rapid international expansion helped prompt a faculty revolt against President John Sexton, who professors say didn’t consult with them and stretched college resources too thinly. The university opened NYU Abu Dhabi in 2010 and a campus in Shanghai in August. It has study centers in 10 more countries on four continents. The faculty of four schools at NYU’s Manhattan campus have voted no confidence in Sexton, who said in August that he will resign in 2016.


Yale’s venture with the National University of Singapore, the undergraduate Yale-NUS College which also began classes in August, triggered protests from faculty objecting to Singapore’s censorship of the media and its treatment of gays. Last year, professors at New Haven, Connecticut-based Yale approved a resolution urging Yale-NUS to respect human and civil rights.

Presidents John Hennessy of Stanford and Lee Bollinger of Columbia, both have said they are reluctant to commit to campuses in China because of concerns about potential conflicts, including over academic freedom.

“You look at the institutions that have done the campus; almost all of them have come to not a good end,” said Emanuel, at Philadelphia-based Penn. “None of the big three — NYU, Yale, Duke — have gone without a hitch. And each one of them has run into various backlashes. It’s a major reason you have a pause from other schools.”

At the same time, massive open online courses, or MOOCs, and other technologies have changed the equation for colleges considering overseas expansion, said Michael Horn, executive director for education at the Clayton Christensen Institute for Disruptive Innovation, a nonprofit organization based on the theories of Christensen, a Harvard Business School professor.

‘Affordable’ Presence

“It allows you to have a presence overseas in a much more affordable and scalable way than ever before,” he said.

For schools looking to create an overseas experience for their domestic students, MOOCs and other technologies won’t deter them, said Horn, who is based in San Mateo, California.

However, “if your mission is to reach out and improve the lives of millions of students no matter where they are, that’s a very different decision set now,” he said.

Some colleges have struggled to recruit students overseas. Michigan State University in East Lansing opened an undergraduate general education program in Dubai in 2008, expecting 400 to 800 students, only to close two years later after failing to attract more than 100, according to the student newspaper. It has since reopened with masters programs in public health, human resources and law.

Low Enrollment

In 2009, after operating for four years, George Mason University closed its campus in Ras al-Khaimah, which like Dubai, is a state in the United Arab Emirates. Administrators locked horns with the local government over subsidies and disappointing enrollment, said Peter Stearns, provost of the college based in Fairfax, Virginia.

“We hoped to be up to 200 students within the first couple of years and we reached 120,” Stearns said. “We were growing but we weren’t growing as we had anticipated and certainly not as fast as the government wanted.”

The government cut George Mason’s annual subsidy and pushed it to lower admission standards, which the school refused to do, Stearns said. A promised campus with a location on the desirable Emirates Highway also failed to materialize.

Enrollment suffered partly because of the high tuition, which was necessary to hire quality professors, he said. The campus charged about $8,500 a year, compared with about $5,445 for an English-language program at the American University of Ras al-Khaimah, which isn’t affiliated with a U.S. university.

Expensive Faculty

“Our faculty, by international standards, is fairly expensive, and then you have added financial support to motivate people to go” to Ras al-Khaimah, Stearns said. “If we were cheaper, we probably would have faster enrollment gains. But we were not gouging and we were not in this to make money for the university.”

U.S. universities deserve credit for recognizing when a project isn’t working, said Morton Schapiro, president of Northwestern University in Evanston, Illinois.

“One of the problems I typically see in academia is people are unwilling to admit they made a mistake,” said Schapiro, an economist who studies higher education. “There’s nothing wrong with pulling the plug; what’s wrong is staying there when it’s not working.”

For a venture to succeed, faculty and students must be of a high enough caliber that they enhance, not dilute, the university’s reputation, he said.

Northwestern Campus

“If you’re going to give someone a degree, are they as good as the ones on your home campus?” Schapiro said. “If they’re not, you’re going to have a problem.”

Northwestern’s campus in Qatar, which opened in 2008 and offers undergraduate degrees in journalism and communications, has just 155 students and may never top 300, said Everette Dennis, the dean. The student body is about 40 percent Qatari, and they receive full scholarships from the government, he said. Tuition and fees for 2013-2014 is $46,482, the same as Northwestern’s main campus.

Northwestern was recruited by the Qatar Foundation, a nonprofit founded by the country’s monarchs, with large subsidies to be part of an “Education City” along with branch campuses of Carnegie Mellon, Cornell and Georgetown universities, among others.

The subsidies mean the schools don’t have to compete for students, and enrollments are low, said Ashwin Assomull, a Mumbai-based partner at the Parthenon Group, which consults with universities about overseas expansion.

‘Vanity Project’

“It feels like it’s more of a vanity project” for Qatar, he said.

Assomull compares the Qatar education hub to nearby Dubai, where there are more than 25 branch campuses from universities around the world and many are thriving without receiving direct government support.

Undeterred following its exit from Ras al-Khaimah, George Mason is seeking better opportunities elsewhere in Asia. The university plans to open a campus in Incheon, South Korea, in March, Stearns said. The government will provide support for up to seven years and the campus, which it will share with other U.S. universities, is already built, he said.

After Ras al-Khaimah “we were somewhat chastened,” Stearns said. “We did learn some lessons.”

To contact the reporter on this story: Oliver Staley in London at ostaley@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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