The diminishing dominance of the American MBA

February 4, 2011, 10:00 AM UTC

While the U.S. has long dominated the world of business education, European and Asian schools are ratcheting up the competition. Graduate Management Admission Council CEO Dave Wilson explains why he’d rather his child head to China for biz school over Harvard.

( — If Dave Wilson’s own son or daughter were accepted into just two schools — Harvard Business School or the China Europe International Business School (CEIBS) in Shanghai, Wilson says he would now encourage his child to study overseas.

That’s despite the fact that Wilson, chief executive of the Graduate Management Admission Council, had once taught at Harvard and claims to have a “soft spot” for the school.

Why? “Whether you are looking to work there or here in the U.S., you are going to discover that you’ll have to deal with Asia and especially China,” he says. “The chief financial officer of Barnes and Noble is probably negotiating with the Chinese with supply chain and contract terms for the Nook. And we are going to see continuing growth in our reliance on other parts of the world. If I were a young person again, I would go to a school outside North America and learn more about other cultures. As we go forward, that is going to be mission critical.”

Wilson, who has an MBA from Berkeley’s Haas School of Business, knows the North American MBA market well. From 1968 to 1978, the Canadian certified public accountant taught accounting at Queen’s University, the University of Illinois and finally Harvard Business School. Before taking on the job as president and CEO of GMAC in 1995, he was a managing partner at Ernst & Young. So the theoretical advice he would give to his own child to pass up Harvard in favor of CEIBS is quite a surprise.

A new study by GMAC, which is the owner of the GMAT test, shows that Europe is drawing a growing share of the prospective MBA applicant pool. It is also increasing evidence of the diminishing dominance of the U.S. business school. GMAC said B-schools in Europe attracted 11% of all GMAT score reports sent in testing year 2010 (July 1, 2009-June 30, 2010), up from a 7.5% share in 2006. Put another way, European institutions received 85,262 score reports from people who took the GMAT exam in 2010, up nearly 90% from the 45,079 score reports test takers sent to European institutions in 2006.

For all the growing interest in Europe, Wilson believes that business schools in Asia are coming on strong as well. “Five, ten years from now,” says Wilson, “I think you may see some interesting new horses in the race. You are always going to have the elite ones from around the world. They have the brand recognition and the financial resources. But just as the Indian Business School came out of nowhere, you’ll see others.”

Just 10 years ago, concedes Wilson, CEIBS would never have come up in a discussion of top-rated MBA programs. The school, which was ranked 17 in the world by the Financial Times earlier this week, was only established in late 1994. It didn’t gain accreditation from the Association to Advance College Schools of Business (AACSB) until December of 2008. “It would not have come up at all,” says Wilson. “Only 20 years ago, CEIBS didn’t even exist. Neither did Oxford’s Said or Cambridge’s Judge School of Business. But the landscape has changed dramatically.”

The Financial Times global ranking, one of only two that combine U.S. schools with others around the world, provides a good picture of those changes. In the Financial Time’s inaugural ranking in 1999, 20 of the top 25 schools were based in the U.S. This year, only 11 of the top 25 business schools are located in the U.S.

In the top ten alone, half of the top schools are outside the U.S.: from England (No. 1 London Business School), France (No. 4 INSEAD), Spain (No. 8 IE Business School and No. 9 IESE Business School) and Hong Kong (No. 6 Hong Kong University of Science and Technology). Just over half of the top 50 schools in the FT survey are now from outside the U.S., including eight in Britain, three in Spain and two in India.

“It’s not just the number,” says Wilson. “It’s the quality. You are starting to see some serious competitors to what was historically a U.S.-dominated market. These international schools are becoming very serious competitors and they are doing it very quickly. I heard a comment at a roundtable discussion. A U.S. dean said, ‘We’ve been doing this for 100 years.’ And one of the European deans said, “I don’t think it will take us that long to get it right.’”

Wilson agrees. “You are seeing these institutions become increasingly competitive. There are three legs to the stool: faculty, curriculum, and student cohort. Once you get the faculty and the curriculum, the cohort will follow. The Asian schools have figured out that these are the three legs and they are working hard at it.”

Even if it has a stellar faculty and solid curriculum, a budding foreign business school still has to face the challenge of matching its teaching style to its students.

“If you use Socratic inquiry, will they all participate? That is a very real issue if you are culturally predisposed not to participate but to absorb content,” says Wilson.

Visa and immigration restrictions have also likely played a part in rerouting prospective foreign business schools students away from American shores.

“I think the visa programs in Australia, the U.K. and the U.S. have made it a lot more attractive for Chinese and Indian students to stay home. We have seen a significant decline in the number of Chinese students who send their scores to America — from 75% to 66%. They are not necessarily staying in China, but they may be going to Singapore and Hong Kong now. They are just not coming across the Pacific,” Wilson says.

As for his advice for a son or daughter, Wilson says he would do what his own dad did when he went to Berkeley for his graduate degree.

“Let’s talk about what you want to do,’” he says. “’Let’s talk about your future. Harvard and CEIBS are both great schools.’ I would encourage him to visit both schools, spend time in their classrooms, spend time talking to other students. When all is said and done, this is probably the biggest single investment you’re going to make. You are taking two years out of your career and then there is the out-of-pocket cost, so take the time to go and visit each school and ask yourself, ‘What do I want to do when I graduate? Which school is going to position me better? Are the recruiters for the places I want to go coming to CEIBS or Harvard?”

Ultimately, Wilson says he would not only encourage his son to study overseas today, he would do so himself.

“If I were a young person again, I would go to school outside North America and learn more about other cultures,” Wilson says. “Studying in another country is a great asset. I think there is great value in living in another culture and learning another language. You don’t live in another culture when you drink cafe au lait on the Champs-Elysees.”

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