Brain drain

The Cultural Revolution took a wrecking ball to Chinese higher education. Professors were purged, humiliated and sent out to the countryside; classes ground to a halt. Professors of finance, marketing and the like were only spared as they largely did not exist on the mainland at the time, but the near-destruction of the domestic research cluster certainly cramped the development of an indigenous, high-quality business faculty in China.

Recovery has been both fast and slow. Schools have leapt out of the ground, and students have swarmed to fill them. According to national statistics, in 2007 4.4 million Chinese graduated from institutions of higher learning. Of those, 270,375 had graduate degrees and 41,464 had doctoral degrees. Of those doctoral degrees, a little over 3,000 studied the art and science of management (compared with 14,000 engineers). They were taught by a total teacher population of 1.16 million, some of whom had PhDs, while others did not.

In fact, it’s safe to say that most did not. Although buildings can be thrown up in months and students admitted in minutes, it takes about 15 years for an educational system to produce a qualified PhD-holding educator, which means that China’s first cohort of domestically produced PhDs has only just entered the market.

Software shortage

"I think that the university build-out that happened in the last decade added hardware without adding software," said John Van Fleet, senior advisor to Shanghai Jiao Tong University’s Antai School of Economics & Management. He believes this imbalance explains the low demand for recent university graduates. Salary growth has been flat, and their unemployment rate is 30%. "The market is pricing their value accurately." 

At the same time, "brain drain" has been a significant problem. As soon as the government opened the gates and let Chinese students go abroad to study, many of the best and brightest took the opportunity to flee. According to a report in the Chronicle of Higher Education, between 1978 and 2005 over 770,000 mainland Chinese students left to study abroad. Three-quarters of them have yet to come back.

The situation for business education is particularly dire. For one thing, domestic production remains relatively low. Of the two Chinese MBA programs ranked in the Financial Times top 100 global business programs, only one (Hong Kong University of Science and Technology – HKUST) produces PhDs, and a survey of other top-rated mainland programs reveals a dearth of doctoral opportunity.

Although some mainland schools are considering starting PhD programs, such programs cannot be created overnight, and running them requires a significant allocation of resources, said Dr Leonard Cheng, dean and chair professor of economics at HKUST Business School. While Cheng noted that some top-tier programs have small PhD programs, it nevertheless seems that most Chinese doctoral students studying business at home are studying at the same overloaded institutions that are currently producing so many unemployed undergraduates. 

Narrow pipe

In China, filling this pipeline takes even longer due to the lack of experienced mentor professors. What experienced faculty mentors are available were largely trained up in the old command economy system, which makes their perspective less pertinent. In the case of mentors for emerging business professors, almost all of them must be imported (or convinced to return) from comfortable and lucrative positions overseas, a tough – although not impossible – sell.

At the same time, domestic academic standards are low across the board. In a survey conducted by the Ministry of Science and Technology, 60% of mainland PhDs admitted to plagiarizing work and paying bribes for journal placement. Enforcement of academic intellectual property rights remains contradictory; while doctoral students are frequently required to publish, they are rarely punished for plagiarizing or fabricating research, or for claiming publication of articles that do not exist.

Unfortunately, Chinese business schools cannot import their way out of this problem, even in the short term. While in many of the subject areas (the humanities in particular) doctoral graduates outnumber teaching positions by orders of magnitude, everyone acknowledges there is a global shortage of talented business faculty.

"The lack of flow of PhDs has been an issue for the sector globally for a long time," said HKUST’s Cheng.

According to a report from the Association to Advance Collegiate Schools of Business (AACSB), a business school accreditation body, unfilled positions for business professors increased throughout the last decade, and business schools reported a corresponding decline in academically qualified faculty. Meanwhile, salary growth for business educators consistently exceeded inflation.

While this combination of high demand and comfortable salary (starting business professors in the US earn around US$150,000 and up) appears to have made the business PhD track more attractive, the sustainability of the recent upsurge in PhD applications reported by business schools is dubious.

Unless demand for MBAs and other business professionals takes more than six years to recover, many of these students will doubtless be attracted away from the academic track back into the workforce – especially since no matter how high the salary that awaits a business professor, the six intervening years of requisite academic study is spent in relative penury. One professor estimated the opportunity cost of his PhD at US$750,000 in lost income.

Even those that graduate cannot be counted on to become teachers. Unlike professors of literature, say, graduates with business-related doctorates can easily find work in the private sector – PhDs in finance, for example, are particularly popular hires on Wall Street.

This means that programs in China must compete on a relatively level playing field with foreign universities for talent. Laurie Underwood, director of external communications for China Europe International Business School (CEIBS) notes that while CEIBS’ reputation helps attract faculty, it still pays globally competitive rates to hire and retain world-class teachers.

Most domestic programs are not so well endowed. Antai’s Van Fleet said that most domestic programs’ tuition fees are an eighth of the global average. This might sound like a bargain, but it makes it difficult to pay qualified faculty from the receipts. "China doesn’t have the wherewithal to haul in 50,000 MBA professors from overseas," he said.

Import substitution

For the time being, most schools must compromise, hiring a portion of their faculty from abroad, another portion from home. Cindy Ai, executive director of Shanghai University’s Global Local MBA program (GLMBA), said that GLMBA’s solution to the salary wars has been to sign long-term contracts with faculty and provide them with opportunities for research abroad. But GLMBA offers different salary packages based on experience and marketability. "Some teachers have very rich experience, others do not," she said.

While this may not be ideal for students, as a long-term strategy, mixing less experienced domestic faculty with highly qualified foreign faculty (or highly qualified Chinese returnees) is one way to provide the "mentoring" experience that Chinese business educators need.

Ultimately, though, there does not appear to be any alternative to increasing domestic production of high-quality business PhDs. At present, China’s rapid growth has made it a hot spot for foreign researchers, but Chinese schools cannot assemble a stable faculty base out of researchers passing through for just a couple of years.

So long as Chinese academic research remains plagued by corruption, so long as teaching foreign students in English is more lucrative than teaching locals in Chinese, the risk will remain that even if China ends up producing more and better business educators, it will produce them for export.