Examining resource allocation within United States public Research I universities: An income production function approach

Abstract

In the past 10 years, state financial support for public universities has declined, when measured as a proportion of current-fund revenues. Whether in response to this decline or to satisfy other ends such as personal utility and prestige enhancement, universities and their faculty have sought alternative sources of revenue, mostly through increased research grants and contracts and student tuition and fees. The effects of these revenue changes are observed in the primary operating units of universities, academic departments, which serve as the primary focus of this study. These changes have promoted concern in recent years that public research universities devote too much of their scarce resources to research at the expense of teaching. Specifically, concerns over teaching productivity and quality abound, especially at the undergraduate level. These concerns have been explained theoretically in terms of faculty preferences to perform research and research-related tasks, over undergraduate instruction--The Economic Theory of the Firm; and in terms of the increasing influence of providers of external revenues upon the behavior of the institutions--Resource Dependency Theory. These two frameworks are used to examine whether changes in departmental revenue support patterns affect undergraduate education at major public research universities. To test the theories, departmental instructional and research productivity data from the 1994 and 1996 American Association of Universities Data Exchange (AAUDE) are examined. This sample data contains information on 8 public Research I universities, 200 departments, and 1000 data points for 1994, and 6 public Research I universities, 134 departments, and 680 data points for 1996. Seemingly Unrelated Regressions and Piecewise Linear Regressions, following a semi-log specification, are used to estimate the rate of return to instructional productivity, research productivity, and departmental quality, within the income production function of the departments. The primary finding was that although some shifts in resource allocation were observed to move in a direction that potentially favored research-related endeavors, i.e., graduate instruction and departmental quality, instruction, overall, was most greatly rewarded in the allocation process, and undergraduate instruction more so than graduate instruction.