Does More Investment in Universities Improve Their Performances?

Abstract

Universities play a critical role in improving the economic prosperity and social well-being of a country. Many countries have invested heavily in higher education and funding university education for their citizens. Does more investment enhance universities' performances? What other factors contribute to universities' productivity? This research used the data envelopment analysis methodology to study the total factor productivity (TFP) of 60 Chinese universities from 2006 to 2016. The study found the values of TFP fluctuated between 0.950 and 1.050 and were relatively stable. Contrary to common belief about productivity improvements, universities with more investment from the Chinese government did not show better performances. Nevertheless, the study found evidence that human resources (e.g., postgraduate-teacher ratio), physical resources (e.g., campus areas), and policy factors (e.g., tenure of the presidents, mergers) have a positive impact on universities' productivity.