Manajemen | Fakultas Ekonomi Universitas Maritim Raja Ali Haji joeb.83.3.147-152

Journal of Education for Business

ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20

Investigation of Higher Education: The Real Costs
and Quality of Online Programs
David E. Smith & Darryl J. Mitry
To cite this article: David E. Smith & Darryl J. Mitry (2008) Investigation of Higher Education:
The Real Costs and Quality of Online Programs, Journal of Education for Business, 83:3,
147-152, DOI: 10.3200/JOEB.83.3.147-152
To link to this article: http://dx.doi.org/10.3200/JOEB.83.3.147-152

Published online: 07 Aug 2010.

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Investigation฀of฀Higher฀Education:฀The฀Real฀
Costs฀and฀Quality฀of฀Online฀Programs
DAVID฀E.฀SMITH
DARRYL฀J.฀MITRY
NATIONAL฀UNIVERSITY
LA฀JOLLA,฀CALIFORNIA฀

ABSTRACT.฀In฀this฀article,฀the฀authors฀
describe฀an฀analytical฀inquiry฀into฀the฀cost฀
and฀quality฀issues฀of฀online฀pedagogy฀
in฀university฀education.฀Using฀economic฀

theory,฀pedagogical฀insight,฀survey฀findings,฀experiments,฀and฀other฀studies฀that฀
researchers฀have฀reported฀in฀the฀literature,฀
the฀authors฀address฀these฀issues,฀identify฀
answers,฀and฀present฀findings,฀implications,฀
and฀recommendations.฀The฀authors฀conclude฀that฀educators฀and฀students฀will฀not฀
realize฀the฀true฀potential฀of฀e-learning฀until฀
the฀administrators฀of฀all฀universities฀adhere฀
to฀the฀higher฀academic฀standard฀of฀full-time฀
faculty฀expertise.
Keywords:฀costs,฀online฀courses,฀quality
Copyright฀©฀2008฀Heldref฀Publications

฀

O

nline฀education฀has฀been฀a฀remarkable฀development฀in฀higher฀education.฀The฀connectivity฀of฀the฀Internet฀
and฀the฀concept฀of฀distance฀education฀is฀
a฀ natural฀ combination.฀ However,฀ nothing฀ before฀ has฀ been฀ so฀ controversial฀
and฀ at฀ the฀ same฀ time฀ widespread฀ and฀

quickly฀driven฀by฀rapid฀investment฀and฀
expanding฀ program฀ offerings.฀ Despite฀
lingering฀ controversies฀ regarding฀ quality฀ and฀ costs,฀ the฀ technology฀ is฀ now฀
deeply฀ integrated฀ in฀ higher฀ education,฀
and฀ the฀ basic฀ process฀ of฀ online฀ delivery฀ has฀ already฀ become฀ an฀ ubiquitous฀
feature฀ of฀ most฀ universities฀ (Survey฀ of฀
Higher฀ Education,฀ 2005).฀ Millions฀ of฀
students฀are฀now฀taking฀courses฀via฀distance฀education,฀mostly฀online฀(Carlson,฀
2004;฀Carnevale,฀2005).
Nevertheless,฀some฀schools’฀administrators฀discovered฀that฀online฀programs฀
were฀more฀costly฀than฀had฀they฀expected,฀
and฀so฀they฀retrenched.฀The฀online฀quest฀
of฀Columbia฀University฀closed฀after฀2.5฀
years,฀whereas฀Caliber,฀the฀online฀partner฀ of฀ the฀ Wharton฀ School,฀ filed฀ for฀
bankruptcy.฀ Many฀ major฀ schools฀ such฀
as฀ Temple฀ University฀ and฀ New฀ York฀
University฀ discontinued฀ their฀ online฀
programs฀ (e.g.,฀ Virtual฀ Temple,฀ NYU฀
Online;฀Kyle฀&฀Festervand,฀2005).฀However,฀at฀the฀same฀time,฀several฀nonranking฀universities฀have฀leaped฀ahead฀with฀
rapidly฀ growing฀ enrollments฀ in฀ their฀

escalating฀ and฀ profitable฀ online฀ degree฀
programs.฀ One฀ of฀ the฀ most฀ amazing฀

examples฀is฀the฀for-profit฀Apollo฀Group,฀
which฀ owns฀ several฀ for-profit฀ schools,฀
including฀ the฀ University฀ of฀ Phoenix.฀
The฀ for-profit฀ University฀ of฀ Phoenix฀
is฀ now฀ the฀ largest฀ university฀ in฀ America,฀ with฀ an฀ enrollment฀ of฀ more฀ than฀
300,000฀ students.฀ Moreover,฀ this฀ forprofit฀ university฀ is฀ expanding฀ globally:฀
in฀Mexico,฀Canada,฀Puerto฀Rico,฀China,฀
and฀India฀(Survey฀of฀Higher฀Education,฀
2005).฀ The฀ question฀ is:฀ Why฀ do฀ some฀
institutions฀ find฀ online฀ programs฀ to฀ be฀
less฀ profitable,฀ whereas฀ other฀ institutions฀ discover฀ online฀ programs฀ to฀ be฀
highly฀profitable?
An฀analytical฀inquiry฀using฀economic฀
theory฀ and฀ a฀ small฀ set฀ of฀ experimental฀
data฀ can฀ answer฀ the฀ question฀ of฀ cost฀
comparability.฀For฀example,฀the฀Copenhagen฀ Business฀ School’s฀ experiments฀
(Pettersson฀ &฀ Heede,฀ 2000)฀ provide฀

evidence฀ from฀ which฀ researchers฀ can฀
draw฀ compelling฀ general฀ conclusions.฀
We฀ also฀ present฀ our฀ recent฀ survey฀ of฀
online฀ business฀ degree฀ programs.฀ The฀
survey฀explains฀the฀behavior฀and฀quality฀
of฀ competing฀ institutions.฀ The฀ answers฀
become฀ clear฀ as฀ we฀ examine฀ the฀ economics฀of฀opportunity฀costs,฀economies฀
of฀ scale,฀ quality฀ considerations,฀ and฀
marginal฀costs.฀
Distinguishing฀Characteristics
Online฀courses฀are฀essentially฀distance฀
education฀because฀the฀students฀are฀physically฀separated฀from฀each฀other฀and฀the฀
January/February฀2008฀

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professor.฀ Distance฀ education฀ degreegranting฀ programs฀ are฀ not฀ a฀ new฀ phenomenon฀(Huntley฀&฀Mather,฀1999).฀The฀
disadvantage฀of฀these฀pedagogical฀alternatives฀relative฀to฀traditional฀classroom-฀

based฀ education฀ has฀ always฀ been฀ that฀
learning฀ associated฀ with฀ self-study฀
lacks฀ any฀ extensive฀ dialogue฀ with฀ the฀
expert฀faculty฀(Perelman,฀1992).฀However,฀the฀interconnectivity฀of฀the฀Internet฀does฀provide฀opportunity฀for฀extensive฀dialogue,฀whether฀synchronous฀or฀
asynchronous.
During฀ the฀ past฀ few฀ years,฀ many฀
researchers฀ have฀ made฀ great฀ promises฀
about฀ reshaping฀ education฀ through฀ the฀
Internet.฀ Nevertheless,฀ the฀ truth฀ is฀ that฀
many฀ online฀ programs฀ do฀ not฀ use฀ the฀
intrinsic฀ potential฀ for฀ real฀ interactivity฀
(Young,฀ 1998).฀ Essentially,฀ the฀ major฀
missing฀ingredient฀is฀usually฀meaningful฀
dialogue฀ and฀ deliberation฀ with฀ appropriately฀ credentialed฀ faculty฀ members.฀
Therefore,฀ many฀ online฀ courses฀ are฀ no฀
more฀ than฀ a฀ simple฀ computerization฀ of฀
the฀ correspondence฀ course฀ (Hjortkjær,฀
1998).฀Although฀the฀use฀of฀virtual฀facilities฀such฀as฀chat฀rooms฀and฀downloadable฀
overhead฀ presentations฀ with฀ speak฀ programs฀has฀become฀widespread฀(Carlson,฀฀
2004;฀Huntley฀&฀Mather,฀1999),฀they฀are฀

still฀inadequate฀substitutes฀for฀high-level฀
cognitive฀ interactivity฀ (Drucker,฀ 2000;฀
Duus฀ &฀ Nielsen,฀ 1999;฀ Pettersson฀ &฀
Heede,฀2000).
Analysis฀of฀a฀European฀Business฀
School
The฀ Copenhagen฀ Business฀ School฀
(CBS)฀in฀Denmark฀took฀an฀early฀leadership฀ role฀ in฀ technology-assisted฀ learning฀experiments฀(Smith,฀1995).฀The฀faculty฀ conducted฀ an฀ extensive฀ review฀ of฀
pedagogy฀ before฀ initiating฀ their฀ online฀
experiments฀and฀developing฀their฀online฀
programs.฀ They฀ recognized฀ that฀ the฀
Internet฀provided฀opportunities฀and฀challenges฀to฀the฀traditional฀learning฀format฀฀
(Duus,฀1996).฀CBS฀established฀carefully฀
planned฀ online-learning฀ studies฀ (Duus฀
&฀Nielsen,฀1999).฀In฀the฀present฀article,฀
we฀present฀some฀important฀results฀from฀
our฀research฀and฀survey฀of฀online฀learning.฀The฀students฀who฀enrolled฀in฀online฀
courses฀ and฀ in฀ on-ground฀ classrooms฀
were฀ analyzed.฀ Variables฀ that฀ we฀ collected฀ included฀ gender,฀ ethnicity,฀ age,฀
grades,฀ and฀ academic฀ background.฀ A฀

148฀

Journal฀of฀Education฀for฀Business

profile฀ of฀ the฀ students฀ showed฀ that฀ the฀
online฀students฀were฀homogeneous฀with฀
the฀ general฀ student฀ population.฀ During฀
the฀experiments,฀Duus฀and฀Nielsen฀kept฀
the฀ same฀ curriculum฀ and฀ faculty฀ members฀ as฀ in฀ traditional฀ courses฀ to฀ ensure฀
consistent฀comparability฀of฀online฀courses฀ with฀ on-ground฀ classroom฀ courses.฀
Academic฀ rigor฀ was฀ further฀ scrutinized฀
and฀maintained฀by฀the฀additional฀monitoring฀of฀a฀CBS฀faculty฀academic฀study฀
board.฀The฀same฀full-time฀faculty฀members฀ who฀ were฀ responsible฀ for฀ the฀ onground฀courses฀developed฀and฀taught฀the฀
online฀courses.
In฀measuring฀and฀comparing฀the฀outcomes฀ of฀ the฀ e-learning฀ and฀ the฀ traditional฀ learning฀ experiences,฀ Duus฀ and฀
Nielsen฀ (1999)฀ based฀ course฀ comparisons฀ on฀ identical฀ learning฀ goals,฀ content,฀ and฀ curriculum.฀ Table฀ 1฀ shows฀
a฀ comparison฀ of฀ academic฀ outcomes฀
for฀the฀online฀and฀traditional฀on-ground฀
courses.฀ Duus฀ and฀ Nielsen฀ found฀ no฀
significant฀ differences฀ in฀ outcomes฀

between฀ classroom฀ and฀ online฀ learners฀ (p฀