Reducing dependence on big brother: higher education looks for innovative funding opportunities.

• Author: McKinney, Ralph E., Jr.

1. INTRODUCTION

   "We need to reduce costs." This statement has become a major directive for higher education institutions, especially those institutions that receive public funds. With the economic storm hindering operations, not all academic institutions and divisions are equipped to weather prolonged exposure to economic hardships. With public funds becoming scarcer and competition to obtain private funds heating up, what are solutions to remain solvent during a global economic crisis?

   The purpose of this paper is to facilitate innovative discussions surrounding how business schools can improve their financial positions. This paper does not address efficient resource allocation and utilization, nor does this paper focus on traditional measures to reduce costs and increase revenues. We assume that these options have already been reviewed and implemented. Our focus is on maximizing knowledge transfer and practical applications to local businesses and global establishments while generating new revenues.

2. LITERATURE REVIEW

   Funding for higher education (HE) is an issue extending beyond national borders (Bevc & Ursic, 2008; Biscoux, 2004; Kapitulik, Kelly, & Clawson, 2007). Research has been presented on France (Carpentier, 2006; Chevaillier & Eicher, 2002), Germany (Liefner, 2003; Orr, Jaeger, & Schwarzenberger, 2007), Jamacia (Nkrumah-Young, Huisman, & Powell, 2008), Kenya (Wangenge-Ouma, 2008), Norway (Frolich & Strom, 2008), Slovenia (Tajnikar & Debevec, 2008), Thailand (Schiller & Liefner, 2007), United Kingdom (Carpentier, 2006; Johnes, 2007), and multiple countries (Dolence, 2006; Jongbloed & Vossensteyn, 2001). HE is shifting towards a global ambition (Docampo, 2007) and HE is moving towards mass education (Dolence, 2006; Frolich & Strom, 2008).

   Because HE leads to a more productive and innovative person (Docampo, 2007), HE contributes to economic growth through the creation of new jobs and innovative knowledge and technology (Kallison & Cohen, 2009). While these contributions increase national security though a stable and growing economy, other social programs such as health care, criminal justice, and social pensions must be balanced against HE (Kallison & Cohen, 2009), especially when restrictions have been placed on public funds and a society faces growing expenses associated with critical programs (Chevaillier & Eicher, 2002). HE programs are not equal; some programs return more to a society, especially to a knowledge-based society (Docampo, 2007). On a micro level, HE provides individuals with advantages in economic mobility (e.g., the ability to accumulate wealth) and social mobility (e.g., the ability to move between social classes) (Chevaillier & Eicher, 2002; McKinney, 2009).

   HE institutions may be classified into either an education-oriented institution or a research institution (Frolich & Strom, 2008). Education-oriented institutions are more likely to reduce academic standards than research orientated institutions when public funding is reduced. Research institutions are more supported in EU countries (Jongbloed & Vossensteyn, 2001) with public funds (Liefner, 2003). Docampo (2007) argues HE institutions can take either the Scandinavian approach where all HE programs are considered equal or the Anglo-American approach where diversity is encouraged. The Anglo-American approach obtains most funds from private sources (Liefner, 2003).

   HE programs dependent on public funds are more at risk for funding reductions than private HE programs (Dessoff, 2009). Dolenec (2006) notes that admission caps might be created to ensure student populations do not exceed what public funding can support. For example, Carpentier (2006) reported that downturns in an economy caused public funding to be reduced and HE to rely more on private funds within the U.K. Additionally, funding fluxuations and student populations created mismatches between resources and the access to HE programs. HE institutions could have highly inconsistent fixed costs (i.e., facilities, utilities) driven by variable costs (i.e., program, student-faculty ratio, technology) which is ultimately attributed to political policy and decision makers applying such policy (Johnes, 2007).

   According to Bevc and Ursic (2008, p. 239), public funding helps encourage efficient use of resources and that "Funding, equity and efficiency of HE are highly inter-related issues." Johnes (2007) agrees that efficiency, managerial and use of resources, can impact funding needs. To fund extra HE expenses, Chevaillier and Eicher (2002) noted tuition fees started to become more acceptable in the EU after the 1980s. But tuition was not the only method to diversify HE funding. Some HE institutions created organizations (i.e., corporations, branches, affiliates) to secure and manage research funds, private contributions, and continuing professional education. Funding organizations can mandate funds be linked to performance indicators, national/state goals/objectives (Jongbloed & Vossensteyn, 2001), student performance (Chevaillier & Eicher, 2002), activity-based funding (Frolich & Strom, 2008), or other accountability standard such as citizen value of taxes (Kallison...