Alan Ryan: Why the university merger won't work

The conventional wisdom in business schools is that mergers are bad for shareholders and employees. They are bad for shareholders because the combined business rarely meets the promises of enhanced productivity made before the event, and bad for employees because the only added value that most mergers achieve is by cutting staff costs – branch closures in banks being the most visible manifestation.

So why do they happen? Received wisdom is that they gratify the egos of the chief executive officers. The argument runs: why do CEOs exist? To create mergers. A chairman and a managing director are all a company needs, so CEOs are men in search of a raison d'etre, and that reason is to create very large organisations that turn into federations or fall to pieces. The value of being big is the possession of large capital reserves – useful in banking, insurance, and pharmaceuticals – but it doesn't go with innovation and growth.

Are universities like businesses? Contemplate the proposed merger of University and Imperial Colleges. Every American university president tells you that the worst of their headaches is the medical school. What defines the University of Hell is that it has two. Imperial is already digesting three, and UCL at least that many. The acquisition of these medical schools over the past 15 years boosted the size of both UCL and Imperial, greatly increased their turnover, and persuaded their bosses that turnover is the same thing as intellectual distinction – not wholly their fault; newspaper league tables do it, too.

The notion that doubling their deficits and tripling their managerial problems will make them superior to Oxbridge is implausible. Until some 40 years ago, Imperial and UCL were obviously better than Oxford at the natural sciences – not least because there was little science in Oxford. And they face real competition at home. In the last research assessment exercise, the London School of Economics could claim to have beaten everyone – Oxbridge included – in its staff's research quality. Its turnover is little more than a quarter of that of Imperial or UCL, medicine and the life sciences being more expensive than economics and sociology.

Sir Derek Roberts of UCL wants to show that it's absurd to have the nation's flagship universities in provincial villages, and Sir Richard Sykes of Imperial wants to take on Harvard in hand-to-hand combat. But the United States suggests that capital cities are not the natural homes of world-class universities. Harvard is in a suburb of Boston, Stanford is in an exurb of San Francisco, Yale is in a recovering inner city, and Princeton is in nowheresville, New Jersey. So much for Sir Derek's grasp of sociology.

How big are the best American universities? Harvard has 6,500 undergraduates, Princeton 5,000, Stanford 6,600; Oxford 11,000, ditto Cambridge, ditto UCL. Imperial looks much the same size as Harvard, with 6,700 undergraduates and 2, 700 graduates, although Harvard is overall much bigger than Imperial – its professional schools in law, education, business, government, medicine and dentistry add another 6,000 students. If the question is how big do you need to produce excellent research, the answer is: certainly no bigger than Imperial already is. Princeton has 1,500 graduate students and collects Nobel Prizes as though they're going out of fashion. Adding professional schools can be good for your budget – if they're in law and business and your alumni are generous – but it doesn't help your Nobel count. The biggest American universities are public universities with strong research schools but nothing to die for: Texas and Ohio State dwarf the proposed mergers in Manchester and London.

The issue is not size but money and management. The best undergraduate teaching in the US is at places like Williams College – where there are 2,000 undergraduates and a devoted faculty. Williams has an endowment of £900m, and charges £17,000 a year in fees; so does Stanford, with £6bn in the endowment and a £1.2bn turnover. Richard Sykes's target, Harvard, had a turnover in 2001 of £1.3bn and an endowment £12bn; the combined UCL/ Imperial turnover would be a little over half that, with three times as many undergraduates to teach, next to no endowment, and the central managerial problem untouched and unmentioned: namely, how to stop the runaway cost of medicine and the life sciences undermining everything else.

The writer is the warden of New College, Oxford

education@independent.co.uk