The determinants of international branch campuses

ABSTRACT

We apply the gravity model of international trade to country-level panel data on branch campus establishments and closures from 2007–2016. Accordingly, we arrive at the first elasticity estimates of the determinants of international trade in branch campuses, contributing to research in higher education and international trade in services. Our results suggest that, along with several gravity model control variables to trade in branch campuses the exporting country’s university rankings, the host country’s regulatory regime, and the presence of an education hub are particularly significant factors. Furthermore, we show that country development classifications affect the salience of some determinants. Finally, we demonstrate the robustness of our benchmark model with a variety of alternative model specifications. In addition to supporting academic endeavors, higher education institutions and host country governments will benefit from the insight our study provides when crafting programs and policies designed to improve their position in the higher education market.

KEYWORDS:

• Branch campus
• international education
• gravity model

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The General Agreement on Trade in Services (GATS) categorizes services trade into four modes. Tay (2014) studies consumption abroad (mode 2), where customers move abroad to consume the service in the service provider’s country of origin. Our paper’s focus is on commercial presence (mode 3), where the service provider maintains a physical presence in the customer’s country of origin.

2 Our development classifications are based on the UN’s 2014 World Economic Situation and Prospects report. We combine the least developed countries under the developing country umbrella for simplification. Doing so has little, if any, effect on our results.

3 With data from Geert-Hofstede’s website, we follow Kogut and Singh (1988) in constructing our measure of cultural distance.

4 We use the Heritage Foundation’s index of economic freedom to approximate the importer’s institutional quality. The Heritage Foundation collects data on 12 indicators that contribute to four pillars of institutional quality including the rule of law, government size, regulatory efficiency, and open markets. The composite score is based on an evenly weighted average of these 12 variables, where a higher score is best. In our sample, Uzbekistan has the lowest score of 39.1, and Hong Kong has the highest score of 90.1.

5 Álvarez et al. (2018) apply the World Governance Indicators (WGIs) developed by the World Bank instead of a composite measure more akin to the Heritage Foundation’s. Still, all WGIs in their model display positive coefficients.