Beyond Good and Evil: Understanding the Role of For-Profits in Education through the Theories of Disruptive Innovation
The debate surrounding for-profit corporations in education is often highly polarized (especially in Ohio): For-profits are cast as either heroes or villains, but seldom anywhere in between. In the American Enterprise Institute’s (AEI) latest report, Michael B. Horn articulates a more nuanced role for for-profits in education.
Horn analyzes at an abstract level the differences between non-profits and for-profits in the areas of scale, focus, and “what opportunities appear attractive.” He posits that for-profits are able to scale their operations quickly and effectively because of a clear focus (turning a profit by providing a high-quality good or service to the corporation’s best customers), and that they are inherently driven to pursue opportunities that maximize profit. Although they are often slower to adapt to market conditions and have more difficulty maintaining a clear organizational focus than their for-profit cousins, non-profits are able to remain in markets where profit opportunities are smaller and fewer.
Horn claims that the for-profit model makes it suited for specific, but not all, ends in education. He focuses on online education and asserts that if proper regulations are put in place, for-profit corporations can be the most efficient vehicles for obtaining high-quality outcomes for students in certain situations. (Unfortunately, Horn does not discuss for-profit charter school operators, a hot issue in Ohio of late.) For-profits tend to innovate and expand in the direction that will appeal most to the consumer. This can work to the advantage of students if the government (the “consumer” for public education) implements regulations and incentives that encourage for-profits to pursue educational goals established in legislation. In the end, Horn recommends an expanded role for for-profit corporations in US education, but he cautions that for-profits should not be viewed as a “final solution.”
Provisions recently inserted into HB 153, Ohio’s budget bill, greatly expand opportunities for for-profit charter operators in Ohio. As written, the bill would allow a for-profit corporation to start a charter school with state funding, then operate with minimal regulation, much as a private school does. Fordham has raised sharp objections to this provision, and our own Terry Ryan recently testified before the Senate Finance Committee to advocate removing it. For-profit corporations can be useful tools in public education, but they must be held accountable for whether or not they achieve established educational goals.
Beyond Good and Evil: Understanding the Role of For-Profits
in Education through the Theories of Disruptive Innovation
Michael B. Horn
American Enterprise Institute
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