It’s no secret that American universities have long been the beneficiaries of generous philanthropic support. Endowments at U.S. schools tower over all the institutions of higher education anywhere in the world. The income from those treasure chests is poured into superior faculty, the best and brightest students, and state-of-the-art facilities that make a U.S. higher education a formidable world competitor.
That’s especially true within the business school community. Consider this simple factoid: INSEAD, with multiple campuses in Europe, Asia and the Middle East, is the wealthiest business school outside the U.S., with an endowment of $213.9 million, or €189.7 million. That compares with the top U.S. contender, Harvard Business School, with a staggering endowment of $3.3 billion. In fact, 22 U.S. business schools boast endowments that exceed INSEAD’s totals, including Babson College and Bentley. No less revealing, the five business schools outside the U.S. with the largest endowments boast a combined total of less than $750 million vs. the five combined U.S. B-schools total of $7.7 billion.
Bottom line: Non-U.S. business schools are far behind their American counterparts when it comes to resources. U.S. business schools are quite efficient at raising money from corporations, sponsors, loyal alumni, and friends, while international schools have lagged behind in building their cash treasure chests. This is perhaps the biggest institutional level difference between the U.S. and the international schools.
THE ENDOWMENT GAP IS A FUNCTION OF HISTORY AND CULTURE
As a rule, international B-schools have relatively small endowments or none at all. This makes them much more reliant on revenue from tuition and fees, annual funds, and government support which in turn means that international business schools are relatively constrained in their ability to fund new initiatives and invest in the development of their programs. The larger endowments held by U.S. business schools not only provide them with a greater capacity to grow and develop for the long term, they also provide a cushion of support that makes them better prepared to survive the effects of any shocks to the business school industry.
The endowment gap is largely a function of history and culture. Outside the U.S., educational philantrophy is far less common. The spirit of giving in the U.S., on the other hand, has a long tradition and many benefactors. Several of the leading European business schools are trying to change this. At the London Business School, for example, Sir Andrew Likierman has made it a priority of his deanship to solidify the school’s financial model by setting a target to raise £100 million by 2018.
All this matters, concedes Likierman, “because we need to be able to attract the best talent, whether students or professors, and for students we’re competing with some institutions that can often offer much more money than we do.” Currently, LBS’ endowment is valued at €65.0 million.
AFTER ENDOWMENT LEADER INSEAD, IT’S ESMT, ROTMAN, EDHEC & HEC MONTREAL
Another reason why endowments at international business schools have not grown at the same pace has to do with the greater acceptance of graduate management education in the U.S. The largest employers of MBAs tend to be U.S. multinational organizations. The recognition of the value of an MBA is also stronger in the American culture. An important outcome of that acceptance is both corporate and executive financial support for business schools.
Still, after INSEAD, the international school with the second largest endowment is the European School of Management and Technology (ESMT) in Berlin, with €137.6 million. Rounding out the top five are No. 3 University of Toronto Rotman School, with €95.9 million, No. 4 EDHEC Business School (Ecole des Hautes Etudes Commerciales du Nord) Business School in France, with €95.0 million, and No. 5 HEC Montreal, with $81.1 million.
CORRECTION: An earlier version of this article reported that Copenhagen Business School was among the schools with the largest endowments. Copenhagen, however, erroneously provided income numbers to P&Q and not the value of its endowment. The school has no endowment.