Does State Ownership Matter? an Investigation of Revenue Publicness and Efficiency at Historically Black Colleges and Universities
*Names in bold indicate Presenter
When revenue publicness is accompanied by formal public ownership, its impact on efficiency might be different than when it is not. First, it might exacerbate susceptibility to political actions, where withdrawal of public revenue might serve as an additional tool to force operational changes that achieve political goals, and this might hinder the organizations’ ability (or incentive) to operate efficiently. Second, public governance and hiring constraints might make public organizations less able to alleviate negative effects of publicness by diversifying resource streams. While private organizations are susceptible to some external influence from revenue source, they are unburdened by the political mechanisms that accompany funding from ownership.
Using a five-year panel of organizational and financial data at Black Colleges, this paper explores potential differences in the impact of revenue publicness on organizational efficiency. First, it investigates if federal and state revenue publicness impact the efficiency of state-owned Black colleges differently. Then, it explores the relative impact of state and federal revenue publicness on private Black Colleges.
Research Design and Findings
This study uses a five-year panel to estimate the relative financial efficiency of public and private HBCUs, then uses a second stage to estimate the effects of publicness on organizational efficiency. This study was influenced by Boyne, Meier, O'Toole, & Walker’s (2005) treatment of Public Administration studies investigating the influences of organizational performance. This study uses financial and organizational panel data from the Integrated Post Secondary Education Data System (IPEDS), a federal dataset containing financial and organizational data for US higher education organizations.
Data Envelopment Analysis (DEA) was used to estimate efficiency in the first stage. To account for input substitutability constraints and account for cost and technical efficiency, both Barnum and Gleeson’s (2011) and Tone and Tsutsui’s (2007) adjustments, respectively, were made to the commonly used CCR model. In the second stage, the impact of state and federal revenue publicness on the efficiency scores from the first stage. Controls included measures for size and nonpublic revenue. To alleviate some concerns about endogeneity (selectivity, research orientation, and organizational memory), models also accounted for organizational fixed effects.
The results find that for state owned Black Colleges, state revenue publicness negatively impacts organizational efficiency while federal revenue publicness has no significant effect on organizational efficiency. Private Black Colleges see efficiency boosts with increased federal and state revenue publicness. This paper hopes to help contribute a more nuanced, evidence-based, policy discussion of the effects of funding on organizational policy and effectiveness.