Understanding determinates for service FDI : the case of education service providers

Abstract

This PhD research aims to understand the determinants of foreign direct investment undertaken by education service providers. Trade in education services worldwide was estimated to be approximately US$2.2 trillion in 2012 (Ng, 2013), making up ten per cent of export of services globally (WTO, 2013). Trade in education services is fast becoming a global business following the trend of other service sectors (Czinkota, 2006) and has experienced significant increase in FDI of recent. Labelled as transnational education (TNE) in the literature, education services have started to establish commercial presence internationally through the development of international branch campuses. These developments have resulted with a significant increase in the establishment of international branch campuses in the last decade. With transnational education developments taking a more trade approach in its expansion, there is a growing need to address these developments from a business perspective. Using universities as a unit of analysis, this research aims to understand the dynamics of transnational education FDI decisions, in particular why, where and how it is happening, from the perspective of international business literatures. In particular, the research question being addressed in this study is: What are the determinants of transnational education providers' FDI decisions? Using a mixed-method explanatory sequential design consisting of both quantitative and qualitative analysis, this study develops and tests a model that explains the determinants of foreign direct investment undertaken by education service providers through the application of the eclectic paradigm (otherwise known as the OLI framework). Eight major ownership, location and internalisation advantages are examined in this study: International experience, Organisation-specific capabilities, Reputation, Market size and potential market size, Host government and policy incentives, Demand from host country to establish partnership, Quality assurance and brand protection, Academic and teaching culture, and methods. 10 major hypotheses are generated to tests which advantages are significant in the universities decision to undertake FDI and establish an international branch campus. From the collected sample of 27 universities that have established an international branch campus globally, analysis is conducted at both an aggregate and institutional profile grouping level (using domestic ranking as a base to determine if the institution is ranked in top 10%, top 20%, and top 30% or below). Quantitative analysis using non-parametric Wilcoxon signed-rank tests and Kruskal-Wallis ANOVA tests are performed to understand which determinant hypothesised are significant at the aggregate level and if any differences are observed between the institutional groups respectively in the first phase. Building on the results of the quantitative analysis phase, one-on-one in-depth interviews with six purposely selected participants, two from each institutional profile group, are undertaken in the qualitative phase. Throughout the qualitative phase, data collected and analysed from the first phase (quantitative approach) is triangulated and affirmed. Results at the aggregate and institutional profile groups support all the ownership advantages tested, these being International experience, Organisation-specific capabilities (managerial and financial capacity), and Reputation. In addition to these ownership advantages, organisation culture in particular the culture senior managers was also seen as a significant determinant. Mixed results at the aggregate level and between institutional profile groups for location advantages tested are observed. Market size and potential market size, and Demand from host country to establish partnership are considered to be significant determinants. Host government and policy incentives was considered not to be a significant determinant at the aggregate level, however, differences between the institutional profile groups was observed. Similarly, mixed results at the aggregate level and between institutional profile groups for internalisation advantages tested are observed. Quality assurance and brand protection was observed to be the most significant determinant for undertaking FDI at the aggregate and institutional profile groups' level. On the other hand no support from universities at the aggregate level and between institutional profile groups is observed with regards to Academic and teaching culture, and methods determinants tested. The greatest outcome from this study is that the observed findings, which do not fully conform to mainstream international business theories, can be attributed to context and industry specific conditions. Traditional international business research has largely focused on for-profit organisations. Given that universities, the unit of analysis of this study, are not-for-profit organisations, it needs to be acknowledged that their determinants for FDI are different from those of regular for-profit organisations. These findings provide initial steps in improving our understanding of the education services sector internationalisation process and journey.

Date of Award	2014
Original language	English