Madrid-based IE Business School focuses on entrepreneurship, and not just because there are few established job opportunities in Spain.

Santiago Iñiguez de Onzoño, dean of the IE Business School, at the Global HR Forum 2011 in Seoul, South Korea. European Pressphoto Agency

Since it opened its doors in 1973, IE has risen steadily in international rankings of business schools and is often listed among the top competitive M.B.A. programs in the world. That global reputation has allowed it to build a diverse student body, with about 80% of students in its masters programs coming from outside the country.

Santiago Iñiguez de Onzoño, IE's dean, says the global approach, along with strong entrepreneurial interests and career goals of its students, has helped shield the school from Spain's economic woes.

Still, it hasn't been immune. Application volume, which soared just after the recent global financial crisis, began to drop this year—as it has at many other business schools—off about 6% from a year earlier. IE also is dealing with competition from up-and-coming Latin American business schools, increasing the challenge of remaining relevant in a crowded landscape.

Mr. Iñiguez, the 49-year-old author of "The Learning Curve," a new book about business education, spoke with The Wall Street Journal about the shakeout in business-school programs, entrepreneurship as a safe haven from the financial crisis, and why managers should read novels.

Edited excerpts:

WSJ: In your book, you say you are optimistic about the future of business schools, but isn't application volume dropping?

Mr. Iñiguez: Management education is still a hot ticket.

In management education, there's some sort of turbulence, turmoil, every three to five years. There's always [predictions of] the end of business schools. What we need to do at business schools is renovate our offerings, revisit the content, change the format and modes of delivery.

WSJ: How will you survive the current shakeout among schools?

Mr. Iñiguez: Keeping dynamic and innovative is the only way to survive. This is a global industry, and along with many other global industries, it's becoming more concentrated. We will see big business schools or very specialized, boutique schools, in the future. Those who don't choose one of these strategies will become trapped. [Mr. Iñiguez said via email that he expects IE to follow the "full service" model.]

We are developing more blended programs [online and in-person instruction], which consist of using the same faculty that we employ in traditional classrooms and producing our own multimedia materials.

WSJ: Would you ever go fully online?

Mr. Iñiguez: No. We are still animals—we need animal feedback. At some stage [participants] need to find the others, shake hands and embrace.

There's no economies of scale in this sort of education. Some analysts believe that by using technology you can have very big classes. Actually, you need to compose smaller groups. In traditional classroom delivery, you can teach a 90-person class.

Here, the professor cannot manage a discussion online with over 35 people. [In smaller groups], people tend to participate much more. People work harder, because otherwise, it shows.

WSJ: Unemployment in Spain has held steady above 20% for the past year. How's the job market looking for your students?

Mr. Iñiguez: We work with our international [outposts] so that [students] can have job offers not just in Spain [but] in the European Union—which includes Germany, which is now attracting lots of talent, or northern countries, which are still growing, or the U.K., which is still home for the financial industry in Europe. We work very closely with our offices in Latin America.

We encourage our graduates to create their own companies. Entrepreneurship is a way to not just avoid the crisis, but also become your own master. It can be forced or can be voluntary.

There is a larger proportion of people [at IE] creating their own business, but what I perceive is they want to become entrepreneurs.

WSJ: Why would a Spanish-speaking student go to business school in Spain over Latin America, where the growth opportunities are so much more obvious?

Mr. Iñiguez: If you compare the composition of our M.B.A. with any program in Latin America, it's more diverse. This provides participants with many different visions of the world.

Spain is not only a bridge between Europe and Latin America, it's also a bridge between Europe and Africa. We serve as a crucible of cultures, which is not the same in Latin America.

WSJ: You've said you want to incorporate more humanities and social sciences [into business education]. Why?

Mr. Iñiguez: Managers should read more history, more biographies and more novels.

Novels stimulate your imagination and your curiosity. A person who has to be innovative needs to cultivate these things.

We run a module on design thinking and architecture. We [ask] students to design their own work space, or look at works of art and explain them. You instill these observational skills and force [students] to become more reflective.

The same applies to many other things, [such as] history. If you know more about Chinese history, you are much better able to manage Chinese teams.

WSJ: What books are on your must-read list for managers?

Mr. Iñiguez: One of my favorites is Tolstoy's "Anna Karenina." Managing people has a lot to do with knowing characters and being a good psychologist. Also, F. Scott Fitzgerald's novel "The Last Tycoon."

When you read biographies of CEOs, you feel you're reading the lives of saints. You cannot learn much. Novels are more realistic.

Write to Melissa Korn at