Competition, Markets, and Sectors: Understanding the Diverse Effects of Competition on University Finances

• In Event: 556 - Regular Session. Innovation and Change in Higher Education

Abstract

Competition between universities for resources has increased substantially since the mid-1980s. However, there has been limited research on how changing levels of interorganizational competition affect these organizations. I argue that competition should affect university behaviors because increased competition can create incentives for organizations to change how they spend their money as they try to maintain or create a competitive advantage in one or more of the resource markets they reside in. I analyze the relationship between the level of competition in two markets (state higher education funding and federal R&D funding) and public and private university spending in 2009-2010 to evaluate this argument and enhance our empirical knowledge of the consequences of increasing competition in higher education. Results indicate that competition in both markets significantly affects university spending. These effects differ by sector and vary based on the nature of the resource markets. Private universities are more susceptible to competition for federal R&D funding however they also have a higher market share and therefore a better competitive position initially. The effects of competition in the state higher education funding market are more diverse than those in the federal R&D market but only significantly affect public universities. These results point to a limited advantage of private universities in these markets. Furthermore they showcase the importance of taking into account the different markets universities are engaged in, the conditions in those markets, and the constraints of the universities when evaluating the effects of interorganizational competition on these institutions and others.

Author

• Sondra N. Barringer, University of Georgia