Localization in the Age of Globalization

What is the 21st-century business school model? In the future, will the most successful business schools be driven by globalization and standard approaches to education? Or largely by the concerns of their local business community? Which factors have played the largest role in shaping global business education since the first business school was founded 200 years ago?

You could be pardoned for thinking that the model of global business education we see today is an American phenomenon—after all, 12 U.S. schools fall in the Financial Times’ top-20 Global MBA 2020 ranking. But the first business school was actually founded in France in 1819. Financed by private business owners, École Supérieure de Commerce de Paris (ESCP) was acquired by the Paris Chamber of Commerce in 1869. ESCP first established the French convention of the standalone business school operating outside the traditional university system. The French model, which relies on deep connections to the business community, promotes a very practical (some might say vocational) model of business education. Its influence continues to this day in most business schools in France, as well as in Belgium, Italy, and the former French colonies.

In 1898, the founding of Handelschochschule Leipzig (HHL), the first business school in Germany, presented an alternative model of business education. Inspired by the Humboldtian research tradition, HHL rejected the French vocational model in favor of a theoretical approach. By the early 20th century, most German business schools had been absorbed by public universities, and the German model influenced business schools in Switzerland, Poland, and Scandinavia.

The first American business school—the Wharton School of Finance and Commerce at the University of Pennsylvania in Philadelphia—was founded in 1881 with an aim to apply to business the scientific practices of Frederick Taylor and the economic principles of Adam Smith. While Wharton’s founding predates HHL, over time it borrowed from the German model. Wharton was soon followed in 1898 by the College of Commerce at the University of California-Berkeley (the first public business school); in 1900 by the Tuck School at Dartmouth College in Hanover, New Hampshire (the first business school to offer a graduate degree); and in 1910 by the Graduate School of Business Administration at Harvard University in Boston, Massachusetts (the first to offer a two-year MBA).

As business schools proliferated globally after World War II, the American model began to serve as the inspiration, and in many cases, the template, for their establishment. Take INSEAD, for example. Established in 1957 with funding from the Ford Foundation, INSEAD is today considered by the global business community to be a leading business school; however, it is relatively unknown within France because it is characteristically un-French. A colleague once quipped that it is effectively an American business school in the forest of Fontainebleau. And in 1963, ESAN in Lima, Peru, became the first business school in Latin America, founded with support from the Graduate School of Business at Stanford University. ESAN’s logo still sports a cedar tree which is remarkably similar to that of its patron. In 1968, the Asian Institute of Management in Manila, Philippines, was founded with the influence of Harvard Business School.

In the 1990s, business schools mushroomed in Central and Eastern Europe, as those countries transitioned from centralized to market-based economies. According to Danica Purg, founder and president of the IEDC-Bled School of Management in Slovenia, and the founding president of the Central and East European Management Development Association, “Before 1990, the phenomenon of an MBA was unknown in Central and Eastern Europe.” At last count, there were almost 70 business schools operating in the region, many that have cooperated closely with, received advice from, or were funded by U.S. business schools.

But this influence is quickly dissipating. Global business education, which seemed on its way to turning into a U.S.-driven commodity, is shifting worldwide to reflect unique local concerns. As markets become more culturally driven and complex, business schools will need to discover models that suit their local contexts, if they are to serve their markets—and have an edge on their competitors. In other words, “one size fits all” will not work anymore.

America's Lasting Influence

Why did the American model dominate for so long? One explanation could be the preeminent position that the U.S. held on the world stage in business and economics after World War II. In the years following, American business schools also became hotbeds for scholarly research, and many of the leading business and economics textbooks used around the world were written by Americans. Consider Jerome McCarthy’s 1960 treatise on marketing, for example—now in its 19th edition, the book introduced the pioneering 4 Ps framework. And what business student or educator has not heard of Michael Porter’s famous Five Forces model?

The homogenizing forces of globalization accelerated in the early 1980s, reinforcing the standardization of business schools. This notion was captured in Theodore Levitt’s seminal 1983 Harvard Business Review article, “The Globalization of Markets.” Levitt asserted that national and regional preferences were converging, and consequently, that companies ought to embrace a global, not multinational, approach to business. His argument was captured succinctly in the mantra: Sell the same things in the same way everywhere.

With this mindset so prevalent, it’s not surprising that, for years, business schools from Chicago to Shanghai, Boston to Buenos Aires, appeared undifferentiated. Many featured a two-year curriculum with prescribed core courses and an assortment of elective courses that were typically taught using a mixture of lectures and case studies. Those case studies were most likely published by Harvard Business School and most often featured American companies struggling with American crises. Even classrooms, no matter where they were, had an American feel to them, with the classic U-shaped auditorium that places the instructor at the center while also allowing students to face each other for debate.

21st-Century Localization

But now we’re seeing Levitt’s argument—that standardization is a strategic response to globalization—fall out of fashion. It’s not that globalization has waned. Au contraire, the relentless push of economic integration continues. But since the early 2000s, business schools have begun to forgo undifferentiated curricula, uniform instructional methods, and common classroom design in favor of their own individualized, mission-driven approaches.

This shift is not strictly ideological. It’s also a practical recognition that despite globalization—perhaps even because of it—cultural and contextual differences persist. Consequently, if business schools are to serve their markets, they must work in concert with, not separate from, these differences.

Consider the following example. In 1993, less than two years after the dissolution of the U.S.S.R., John Branch, a co-author of this article, taught the first marketing course in the first MBA program in the first business school in Kyrgyzstan. During a lecture on consumer behavior, he said, “You know when you are in the bread aisle at the grocery store, and you see all those different types and brands of bread?” Keep in mind, in post-Soviet Kyrgyzstan, grocery stores were rare, and there were only two types of bread: Russian loaf bread, or хлеб (pronounced “khleb”) and Kyrgyz flatbread, or нон (“non”). And because нон is not considered bread, there was only one type of bread, хлеб.

The students were understandably dumbfounded. As John discovered—when his lecture fell flatter than нон—cultural and contextual differences cannot be ignored. The two of us have seen this trend play out in management education across five dimensions:

Instructional materials. Business schools have traditionally looked to Harvard Business School for instructional materials. But in recent years, there is a growing appreciation for the value of cases, exercises, and other materials that are grounded in local business environments and that feature familiar companies and situations. With that in mind, instructors at the William Davidson Institute (WDI) at the University of Michigan in Ann Arbor have trained more than 130 university instructors in the Philippines to write cases as part of the STRIDE (Science, Technology, Research and Innovation for Development) program. Funded by the United States Agency for International Development, STRIDE training resulted in 94 cases based on Filipino organizations—all available for free. Instructors have continued to write cases after the five-year project ended in 2017, and several have taught their colleagues to write cases.

Instructors. Business schools outside the U.S. and Western Europe have faced a shortage of qualified instructors. In the past, a common remedy has been to fly in professors from America and Western Europe. But more business schools are finding a different way.

For example, the Zagreb School of Economics and Management (ZSEM) in Croatia—the first AACSB-accredited university in the Balkan region—has been cultivating its own cadre of qualified Croatian instructors. Dean and ZSEM founder Đuro Njavro has funded local educators to pursue their doctoral degrees in schools such as HEC in France, the University of St. Gallen in Switzerland, and Maastricht University in the Netherlands. In most instances, their dissertations apply global knowledge to local issues, from corporate governance in Croatian companies to the performance of the Croatian hospitality industry. Although ZSEM invites visiting professors to teach topics for which the school lacks coverage, its modular curriculum allows it to bring external instructors in for relatively short stints, making the model more affordable.

Branding. To differentiate themselves from competitors, more business schools have conducted almost meditative reflections on their unique characteristics—which usually boil down to local concerns. For example, John was asked to help develop a strategy for Moscow School of Management Skolkovo in Russia. After ten years of operation and an investment of more than US$200 million in its campus, Skolkovo had only a handful of full-time instructors and relatively few graduates. Previous administrators, all from Western Europe, were apologetic about Russia’s “challenges” and reasoned that for Skolkovo to become a world-class business school, it ought to be, well, a Western one.

John fashioned a different logic, applying Simon Sinek’s “Why-How-What” Golden Circle model. He started by asking the fundamental question, “Why does the Moscow School of Management Skolkovo exist?” In its answer, he advised the school to embrace, leverage, and even celebrate Russia. The rationale was simple: Russia is unique, so conducting business in Russia requires unique approaches. Skolkovo exists, therefore, to help individuals and organizations conduct business in Russia. John even imagined a series of advertisements that would promote Skolkovo by connecting the school with iconic Russian visuals: a Fabergé egg, Russian матрёшка (“matryoshka”) nesting dolls, and the multicolored onion domes of Saint Basil’s cathedral.

This rationale provides a very clear guiding star for the school to follow for its how and what. For example, Skolkovo will open a research center or introduce a new program only if it aligns with the school’s why—to help individuals and organizations conduct business in Russia.

Educational programs. In the 1990s and early 2000s, countless business schools in Western Europe launched two-year full-time MBAs. In 1995, John even taught in a new MBA program in Uzbekistan as part of a European-funded project whose aim was to help revamp the country’s economy. However, many of those two-year programs closed a few years later due to lack of interest.

At the Stockholm School of Economics in Riga (SSE Riga), established in Latvia in 1993, administrators questioned the necessity of an MBA altogether. With a population of only 2 million, Latvia saw its economy cut in half after regaining independence in 1991. At a time when Latvia’s companies had yet to emerge from Russia’s shadow, SSE Riga’s administrators believed the country needed graduates with both general business knowledge and a solid foundation in economics. In July 1994, the school enrolled 56 candidates in its new BSc in economics and business; today graduates of that program work in successful Latvian companies, global companies, startups, and the Latvian government.

SSE Riga didn’t introduce an MBA program until 2002, and even then offered it part-time, because the Latvian market would not support full-time graduate studies. In 2005, SSE Riga introduced the Strategic Management Program in partnership with the William Davidson Institute. Delivered in the spring, the ten-day mini-MBA provided students with an intensive cross-functional view of organizations. The condensed format has proven so popular that in 2019, WDI and SSE Riga added a fall offering.

Business models. Making a shift from standardized to localized approaches can be challenging for existing business schools, which have to move away from established ways of teaching. It’s easier for new business schools, which benefit from a blank slate. They can mesh the best of established world-class business schools with the realities of their local cultures and contexts from the start.

This hit home for us as we recently consulted for the ACLEDA Institute of Business (AIB), Cambodia’s newest business school based in Phnom Penh. AIB originated as a training department of ACLEDA Bank, Cambodia’s largest private bank; it became a full-fledged business school in 2016. We traveled to Phnom Penh to absorb local culture, tour the school’s facilities, and interview instructors and staff. Next, we hosted several AIB administrators at the University of Michigan’s Ross School of Business, where they met with deans, department heads, and administrative leads.

However, we insisted that while AIB’s administrators should consider the Ross School of Business a source of ideas and inspiration, it should not be their only model. We emphasized that alternative successful models—such as the grandes écoles in France and the Indian Institutes of Management, which focus on teaching, rather than research—could provide different and perhaps even more compatible business models for AIB.

Because AIB is such a young institution, its administrators are in an enviable position. They are not yet wedded to any specific curriculum, instructional methods, or physical design, so they can more freely adopt creative and disruptive innovations. It’s an advantage that might enable them eventually to leapfrog more established business schools.

Yesterday, Today, Tomorrow

The annals of management education claim that business schools were a European invention of the 19th century and that their propagation in the 20th century was attributable to the U.S. But the first two decades of the 21st century suggest that contemporary business schools have no allegiance to any “empire” other than their own. That is to say, localization has become standard operating procedure for most business schools, running counter to the 20th-century push for globalization.

Competition is forcing business schools to nurture and leverage their distinct core competencies; it requires them to create unique, differentiated brands. Global accreditation agencies such as AACSB International and the European Foundation for Management Development, too, now encourage business schools to challenge the status quo and implement innovative approaches to serve the needs of their local markets.

The consequence of these efforts, somewhat ironically, is a global management education industry made up of a multitude of highly differentiated, localized business schools. Success, we predict, will come to business schools that are adept at integrating global innovations, but in ways that account for local cultural and contextual differences.