ABSTRACT
Universities have long been regarded as multi-product firms in that they seek to produce multiple outputs simultaneously. The theoretical and empirical literature on institutions as multi-product firms has focused almost exclusively on the joint production of a familiar trio of outputs: teaching, research, and service, with no attention paid to the entrepreneurial role of universities. Additionally, significant research exists on the presence of scale economies in institutions. Using data for a sample of US universities from the National Center for Education’s (NCES) Integrated Postsecondary Education Data System (IPEDS) – which contains extensive data for all US research institutions – the National Science Foundation’s Integrated Science and Engineering Resources Data System (NSF WebCASPAR), and the US Licensing Activity Survey of the Association of University Technology Managers (AUTM), I attempt to test the presence of scale economies in both traditional university outputs and the more recent, entrepreneurial outcomes. The analysis used OLS and negative binomial regression, with fixed-effects for institutions and years, to examine the association between various institutional characteristics and the production of three of the four outputs. My empirical results suggest that while graduate enrollments provide constant returns to entrepreneurial outcomes, they will provide diminishing returns to educational outputs. Conversely, the results indicate that large undergraduate enrollments will negatively impact educational production, while both large and small institutions are effective at achieving the entrepreneurial goals. A number of studies have advanced the conception of institutions of higher education as multi-product firms. Multi-product firms are those that seek to simultaneously produce multiple outputs from multiple inputs. In the case of postsecondary institutions, observers usually highlight a familiar trio of outputs: teaching, research, and service.1 While these are the traditional goals of higher education, over the past two decades research universities began to engage in activities of a more entrepreneurial nature. With the introduction of this agenda, these institutions began to produce outputs that serve the goals of economic development through fostering university and industry connections. In institutions’ entrepreneurial pursuits, outputs often took the form of patents, licenses, and start-up companies, utilizing the technology transfer office (TTO) for the vehicle to bring scientific inventions to the market. In both theoretical and
methodological terms, empirical investigation into multi-product firms poses more challenges than a single output perspective. However, if one ignores institutions’ other outputs, resulting models can lead to a misunderstanding of a single outcome of interest. That is, studies using higher education institutions as the units of analysis should attempt to account for the multi-dimensional nature of these organizations. Concurrent with the shift to entrepreneurialism was an increasing demand for institutions to become more accountable. This often manifested itself in the call for colleges and universities to be more ‘efficient’. While the notion of efficiency for policymakers and the public is likely different from that of economists, efficiency is a typical measurement in studies that employ a firm based approach. However, as Worthington (2001) notes, in the case of education, ignoring the potential for inefficiency within these organizational types may lead to misunderstandings of the nature of their economies. The goal of this study is to empirically assess the presence of scale economies in research universities, while paying mind to multiple goals and outputs. Using panel data on 103 US institutions, this analysis tests the influence of various measures of university size and capacity on three outputs: undergraduate education, research, and entrepreneurialism. Because this study draws on several strands of literature, the following review is presented in two parts. The first section of the literature review focuses on institutions as multi-product firms and studies that focus on specific outcomes associated with technology transfer. The second section discusses the literature on scale economies in higher education.
