Resource allocation within United States public research I universities: Income production function and socially constructed decision-making approaches

In the past 15 years, state financial support for public universities has declined, when measured as a proportion of current-fund revenues while expenditures, in the same time period have risen dramatically. In this mixed methods study, several theories were used to explain patterns of university resource allocation: The economic theory of the firm , resource dependency theory, rational/political and critical/political. The research combines d'Sylva's (1998) and Volk's (1995) work and considers, by measuring directly the role of administrators who have budget authority, the impact of the socially constructed production function. The study uses d'Sylva's work extensively in order to create the baseline econometric analysis by including the relevant variables. In addition, the study adds to the existing body of knowledge by providing a broader understanding of production functions that encompasses the role of the socially constructed production function by key administrators who have budget authority. To test and explore the theories, departmental instructional and research productivity data from the AY 1999 American Association of Universities Data Exchange are examined. The quantitative data sample consisted of 10 major public Research I universities and 152 departments. OLS and GLM regressions, following a semi-log specification were employed to estimate the rate of return to instructional productivity, research productivity, and departmental quality. The qualitative sample consisted of six administrators with budget authority from one Research I university. A thematic analysis technique was employed in order to identify salient themes related to internal resource allocation. Significant findings are that undergraduate instruction and departmental quality yield high returns to departmental earnings. Cross-subsidization exists and some departments within fields enjoy "halo effects" above and beyond their productivity and merit. In describing the socially constructed nature of such difference, one dean is cognizant that his college is very productive and efficient delivering "cheap" instruction, yet it is penalized in the allocation formula. Similarly, another dean is very aware that his college has large numbers of women and minorities that help in the "coloring" of the university, and that disadvantages his college in the allocation formula