Blurring Boundaries and Borders: Interlocks between AAU Institutions and Transnational Corporations

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Blurring Boundaries and Borders: Interlocks between AAU Institutions and Transnational

Corporations

Lucia Brajkovic, Ilkka Kauppinen, Lindsay Coco and Hyejin Choi

Introduction

In the contemporary knowledge economy higher education is a provider of intellectual

property and helps to develop a highly skilled workforce. It has become an integral part of

national innovation systems in order to help attract globally mobile capital. From this

perspective, the key organizational actors of the knowledge economy are universities and

transnational corporations (TNCs). Integration and collaboration between these organizations is

pursuant to neo-liberal ideology and is supported by national, international, and supranational

agencies. This view is supported by many higher education studies, as well as global capitalism

studies (e.g. Carroll, 2010; Carroll & Beaton, 2000; Kauppinen, 2012; Robinson, 2004; Sklair,

2001; Slaughter & Leslie, 1997; Slaughter & Rhoades, 2004).

This study seeks to identify the connections of TNCs with the prestigious Association of

American Universities’ (AAU) institutions through the university trustees which simultaneously

serve on the boards and hold executive positions at TNCs. These ties, also known as interlocks,

can provide opportunities for information and resources to be shared between organizations

(Mathies & Slaughter, 2013). Additionally, many scholars perceive TNCs as central agents of the

economic globalization, since they have the ability to plan, coordinate, and control activities

across countries (Kauppinen, 2012). However, there are still few studies that demonstrate the

significance of TNCs with respect to higher education; much more attention has been given to

international organizations influential in the policy realm, such as the World Bank, OECD and

WTO. Despite the fact that some elite university trustees are heads of or sit on the Board of

Directors of Fortune 500 and other research intensive corporations (Pusser, Slaughter & Thomas,

2006), there is a dearth of research on these institutions as the vehicles for cutting edge research

with the potential for economic development.

There is no consensus in research literature regarding the exact definition of TNCs. In

this paper, we refer to “transnational corporations” as those corporations that have developed

increasingly global strategies of operation, not only in terms of markets, but also in terms of

R&D networks, board interlocks with other corporations, and the location of headquarters,

production facilities, subsidiaries, and subcontractors (Burris & Staples, 2012; Carroll, 2010;

Robinson, 2004; Sklair, 2001).

Looking from the university perspective, we initially assume that connections with TNCs

could increase the university prestige, as measured by well-regarded international rankings, by

possibly increasing research, publication, and funding opportunities, joint patenting, cross-border

cooperation, and other activities. Through these, prestige is tied to infrastructure and resources;

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moreover, donor behavior can also be influenced through the board interlocks. We chose to

utilize international rankings, not a U.S based system like U.S. News and World Report, because

of the emphasis in this paper on the transnational networks and global prestige. As globalization

has become ubiquitous, we have seen the rise of what Marginson (2010) terms the “Global

Research University” where institutions are striving to achieve international recognition and

resources to position themselves at the top of international rankings.

Scholars have discussed at length ranking models, particularly their methodological

designs, and there has been considerable debate regarding the rankings’ reliability and validity

(Delgado-Marquez, Hurtado-Torres & Bondar, 2011), as well as theoretical debates on how to

understand the meaning of global university rankings (e.g. Hazelkorn 2011). We understand,

briefly, global university rankings as powerful and hegemonic disciplinary technologies that

have, through constant surveillance, a normalizing power in terms of what types of goals and

strategies governments and universities adopt (e.g. Hazelkorn 2011; Cantwell and Taylor 2013).

Our study focuses primarily upon the Shanghai Jiao Tong University’s Academic Rankings of

World Universities (ARWU), due to its the attention and value placed upon research as a

measure of global prominence.

In this study we ask the following main research questions:

1. To what extent are AAU institutions tied to TNCs through trustees?

2. Are the connections between AAU institutions and TNCs associated with higher scores

on the ARWU?

Findings of this study suggest that private AAU institutions, on average, have more ties

to TNCs than public ones, and that the number of TNC ties has a positive impact on ARWU

rankings of the institutions.

Conceptual Framework

We use academic capitalism theory to guide this study (Slaughter & Leslie, 1997;

Slaughter & Rhoades, 2004). As this theory suggests, in order to achieve prestige and position

themselves in the knowledge economy, research universities connect with public and private

industry and engage in market and market-like behaviors and practices. As a result, markets,

states, and higher education become interrelated, and the boundaries among these spheres

become blurred. These practices are not a novelty in the United States; however, trends in higher

education show that countries such as China and India, as well as many European countries, are

also becoming more involved with at least some of those activities (Kauppinen, 2012; Kauppinen

& Kaidesoja, 2014; Slaughter & Cantwell, 2012). We argue that TNCs play a crucial role in

creating new circuits of knowledge, especially when they cross nation-state boundaries.

Data

To evaluate our research questions we used 2010 data on the 54 private university and

public university system boards that comprise the 61 institutions in the AAU (see Table 1). A

research team, as part of an overarching grant, gathered this data set. We obtained voting trustee

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lists through university websites, archives, and direct requests. We then used the Standard and

Poor's Directory of Executives (S&P) and Compustat to determine the ties of these trustees to

publicly traded and privately held firms in 2010. These ties included trustees’ day jobs, executive

positions, and board affiliations.

The key explanatory variable is the number of TNC ties each university had in 2010. In

order to identify whether the corporations were transnational, we used the Fortune Global 500

list, Forbes Global 2000 list, and the top 100 TNCs list from the United Nations Conference on

Trade and Development (UNCTAD) in 2010. We also used Mergent online database1 to further

identify TNCs. Mergent online secures over 22,000 US and foreign firms’ information ranging

from business summaries and financial statements to company details including subsidiary

information. Based on the Mergent information, we counted a firm as a TNC if it had more than

one foreign subsidiary.

Table 1. The Number of TNC Ties, Total Firm Ties, % of TNC Ties2

University (Public AAU) TNC

ties

Total Firm

ties

% of

TNC ties

Georgia Institute of Technology-Main Campus 3 17 17.65%

Indiana University-Bloomington 2 5 40.00%

Iowa State University 2 76 2.63%

Michigan State University 0 4 0.00%

Ohio State University-Main Campus 9 21 42.86%

Pennsylvania State University-Main Campus 5 24 20.83%

Purdue University-Main Campus 3 12 25.00%

Rutgers University-New Brunswick 11 33 33.33%

Stony Brook University 1 13 7.69%

Texas A & M University-College Station 0 9 0.00%

The University of Texas at Austin 1 13 7.69%

University at Buffalo 1 13 7.69%

University of Arizona 1 7 14.29%

University of California-Berkeley 5 50 10.00%

University of California-Davis 5 50 10.00%

University of California-Irvine 5 50 10.00%

University of California-Los Angeles 5 50 10.00%

1 More information about Mergent (2014) can be found here: http://www.mergentonline.com/login.php 2 Information about the firm ties for university systems (e.g. University of California System) is the same for each

campus

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University of California-San Diego 5 50 10.00%

University of California-Santa Barbara 5 50 10.00%

University of Colorado Boulder 0 2 0.00%

University of Florida 2 14 14.29%

University of Illinois at Urbana-Champaign 6 10 60.00%

University of Iowa 2 76 2.63%

University of Kansas 0 6 0.00%

University of Maryland-College Park 3 13 23.08%

University of Michigan-Ann Arbor 1 10 10.00%

University of Minnesota-Twin Cities 0 2 0.00%

University of Missouri-Columbia 1 8 12.50%

University of Nebraska-Lincoln 1 5 20.00%

University of North Carolina at Chapel Hill 2 13 15.38%

University of Oregon 1 6 16.67%

University of Pittsburgh-Pittsburgh Campus 32 84 38.10%

University of Virginia-Main Campus 2 21 9.52%

University of Washington-Seattle Campus 5 33 15.15%

University of Wisconsin-Madison 1 10 10.00%

Total (Public AAU) 128 860

University (Private AAU) TNC

ties

Total Firm

ties

% of

TNC ties

Brandeis University 6 26 23.08%

Brown University 15 63 23.81%

California Institute of Technology 35 147 23.81%

Carnegie Mellon University 28 108 25.93%

Case Western Reserve University 17 63 26.98%

Columbia University in the City of New York 7 30 23.33%

Cornell University 30 72 41.67%

Duke University 4 31 12.90%

Emory University 17 62 27.42%

Harvard University 1 13 7.69%

Johns Hopkins University 15 81 18.52%

Massachusetts Institute of Technology 38 140 27.14%

New York University 20 108 18.52%

Northwestern University 43 142 30.28%

Princeton University 11 39 28.21%

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Rice University 10 31 32.26%

Stanford University 14 71 19.72%

Tulane University of Louisiana 7 24 29.17%

University of Chicago 32 116 27.59%

University of Southern California 32 93 34.41%

University of Pennsylvania 33 111 29.73%

University of Rochester 17 54 31.48%

Vanderbilt University 11 50 22.00%

Washington University in St Louis 31 115 26.96%

Yale University 7 28 25.00%

Syracuse University 6 16 37.50%

Total (Private AAU) 487 1834

Methods

To answer our two research questions we used descriptive statistics, social network

analysis, and regression analysis. For our first research question, we examined descriptively

whether there was any difference between the public and private AAU universities’ TNC ties,

and compared the TNC ties as a percentage of the total corporation ties of each institution. To

map out ties between the TNCs and universities, we employed social network analysis. This

method enabled us to visualize the network of universities and corporations, where trustees serve

as a channel between organizations.

To address our second research question, we used ordinary least square regression. This

method allowed us to investigate whether and to what extent the outcome of interest is predicted

by explanatory variables, holding other variables constant. We included control variables (total

research expenditure and total revenue) in the model for each institution to account for other

factors that may influence rankings. After finding a statistically significant difference in the

number of transnational firm ties between the public and private AAUs, we added a dummy

variable for ‘private’ in the model to obtain regression results for the public versus private

AAUs. Correlation test results confirmed there is no strong association among selected

independent variables.

Findings

Table 2 and Figure 1 provide an overview and comparison of total corporation ties,

transnational ties, and percentage of transnational ties between the public and private AAUs.

After running a t-test, we verified there is a statistically significant difference in the transnational

corporation affiliations between the public and private AAUs. Private AAUs have more

transnational firm ties than the public ones on average, as well as the greater share of TNC firms

in the total number of ties. These findings are aligned with the findings from the previous studies

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(Slaughter, et al., 2014). The results also reveal that those universities that have highest number

of TNC connections tend to be the same universities that have highest number of corporate

connections in general.

Table 2. Average of Total Firm Ties, TNC Ties, and % of TNC Ties by Private/Public AAU

group

Total Firm ties TNC Ties % of TNC

Public 24.57 3.66 15.06%

Private 70.54 18.73 25.97%

*T-test for difference between two groups is statistically significant at 0.001 level.

Figure 1. TNC Ties of Public and Private AAUs

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The organization networks give us a visual indicator of data presented in Table 1. Figure

2 is a map of the total network. The blue and green squares indicate private and public

universities, respectively, while the grey squares are firms connected to the universities through

trustees; each trustee is considered a tie between university and a firm. Figure 3 is a map of

universities and their connections to only TNCs, whereas Figure 4 depicts network of

universities and all firms, with TNCs represented by yellow triangles.

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The Number of TNC Ties_Private AAU

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Figure 2. Map of the Total Network

Figure 3. Map of the TNC Network

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Figure 4. Network of All Firms with TNC Sub-network (yellow)

Table 3 shows descriptive statistics and Table 4 summarizes a simple OLS regression

model. The result shows that 53% of the variation in the ARWU is explained by the variance of

the selected variables.

Table 3. Descriptive Statistics

Variable Mean Std. Min Max

Shanghai Global

Ranking 77.64 85.04 1 364

The number of

TNC ties 10.08 11.63 0 43

The number of

Total Firm Ties 44.16 39.48 2 147

Private 0.43 0.50 0 1

Log of

Research Expenditure 19.69 0.71 17.70 20.86

Log of Total Revenue 21.45 0.63 19.60 22.52

*Sample size for listed variables is 61 (35 private and 26 public AAU institutions)

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Table 4. OLS Model: ARWU and TNC ties

Shanghai Ranking

Number of TNC ties 1.62*

(0.91)

Log of Research Expenditure 59.18***

(19.17)

Log of Total Revenue 25.52

(21.39)

Private -4.17

(21.23)

Constant -1439.67***

(270.55)

R-squared 0.527

. *p<0.10, **p< 0.05, ***p< 0.01

Discussion and Conclusion

The results of this study indicate that trustees influence international prestige of the

universities through the ARWU rankings. They also demonstrate the existence of transnational

sub-network of AAU institutions – the corporate world network. This sub-network reflects the

internationalization trend of research universities, and more abstractly, transnationalization of

social relations, i.e. globalization. One plausible explanation for why a higher number of TNC

ties tends to be associated with higher position in the ARWU rankings might be found from the

Matthew effect (Merton, 1968). TNCs might be willing to establish connections with those

prestigious universities, such as AAU institutions, which are already positioned highly in

university rankings (and thus, already have substantial R&D funding). These interlocks then in

turn have potential to bring more resources to respective universities which helps them to sustain

and possibly increase their position in the ARWU.

University trustees tied to TNCs may also provide know-how and professional expertise

to their institutions as they may have insight into how to develop and coordinate projects in

particular geographic locations or across nation-state borders. This knowledge could prove

advantageous as universities seek to internationalize through various activities. For instance, for

those institutions that seek to develop international branch campuses, these types of relationships

that provide knowledge “in country” are extremely beneficial as institutions are trying to

navigate foreign national systems. Consequently, universities may adopt a research focus that

would presumably benefit respective TNCs, i.e. such research that produces outputs meaningful

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to corporate players operating across nation-state borders. Finally, this case of Matthew effect

might contribute to further stratification of higher education institutions.

Transnational sub-network of AAU institutions and the corporate world network can be

seen as a channel for processes of innovation and economic development that take place beyond

nation-state borders, due to their integration with global production networks. This might be an

efficient way for universities to gain more resources and become more competitive in global

university rankings, but it is another question whom and in which way this sort of strategy would

ultimately benefit: respective universities, or some segments of it, respective nation-state, its

innovation system and its citizens, or global accumulation of capital irrespective of any particular

nation-state borders?

Significance

Our study suggests the AAU universities and their boards of trustees are not external to

the transnational flows of capital, but rather illustrative examples of how corporate world

rationality is expanding to other social spheres and spaces. That puts the topic and relevance of

our research beyond the traditional comfort zone of higher education studies. However, if we

take seriously the foundational tenant of academic capitalism—the blurring of boundaries

between higher education, markets, and states—then this research topic is of utmost importance

as we learn how higher education systems are navigating an ever-changing global environment.

This multi-faceted process implies the social world is not neatly organized along the boundaries

of scientific disciplines or fields of study, which also uniquely positions this research to

potentially contribute to the broader knowledge base in the area of globalization studies.

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