Document Type
Article
Publication Date
2023
Journal Title
Studies in Higher Education
Volume Number
48
Issue Number
9
First Page
1498
Last Page
1515
DOI
https://doi.org/10.1080/03075079.2023.2204922
Version
Post-print: the version of the article having undergone peer review but prior to being published
Creative Commons License
This work is licensed under a CC BY-NC-ND License.
Disciplines
Business
Abstract
This study examines the relationship between cost efficiency and privatization at 163 public research institutions in the United States between 2005 and 2015. We employ a spatial autoregressive (SAR) random-effects model and stochastic frontier analysis (SFA) to estimate the relationship between costs and four privatization variables: auxiliary enterprises as a percentage of total revenue, tuition and fees as a percentage of total revenue, private grants/contracts as a percentage of total revenue, and out-of-state first year enrollment. Results showed cost inefficiency at public research universities increased between 2005 and 2015, even as reliance on private sources of revenue increased. Public research universities exhibit 28.5% overall cost inefficiency over the time period studied, 85.6% of which is short-run cost inefficiency. This suggests that most of the cost inefficiency varies across years and may be the result of challenges that institutional leaders face adapting to short-term fluctuations in market-oriented sources of revenue. The results also show a nonlinear relationship between cost inefficiency and three of the privatization variables. Given the expectation of little to no increase in state support for public research universities, this study has implications for policy, institutional management, and future research.
Digital USD Citation
McClure, Kevin; Vamosiu, Adriana; Titus, Marvin A.; and Gray, Steffon M., "Privatization and Cost Inefficiency at US Public Research Universities" (2023). School of Business: Faculty Scholarship. 38.
https://digital.sandiego.edu/busnfaculty/38