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The competition folly

Brendan Cantwell
Brendan Cantwell
Why do colleges and universities compete and attempt to secure a strategic advantage even when it’s not clear they can compete effectively or act strategically. That’s a big question and probably mostly it’s been answered before. But I offer a few more words about it in light of a new paper and also so that I could avoid addressing some of the other topics - like the prospect for an intellectually viable higher education studies - that I have been thinking about but don’t have anything to say about yet. So, onward to competition.

When the cash cows don't moo.
paper from a new journal by Robert Keltchen came through my google alerts. The article caught my attention because its findings are counter-intuitive. We all assume that enrolling out-of-state students is a strategy that public universities in the US pursue to generate revenue. There is a debate about whether or not out-of-state students (including international students) displace students from in-state. And we have some evidence that out-of-state students suppress enrollment of low-income students. And we know that colleges and universities are more likely to recruit out-of-state students when state funding goes down. So we all assumed that those out-of-state students bring in the dough. For example, at Michigan State University, the sticker price of in-state tuition and fees is $14,914 per year, whereas out-of-state tuition and fees are $40,726. So an out-of-state student would need to get a $25,813 discount to net fewer tuition dollars than a full-pay in-state student. Makes sense that out-of-state students, even after some tuition discounts as a recruitment sweetener (“Our Jonny got a merit scholarship?”), are gravy. That’s what we all thought. It turns out we might have all been wrong.
Keltchen examined the relationship between an increase in the number of out-of-state enrolled with net tuition revenue per student as well as expenditures per student. He finds (mostly) no relationship for less selective and non-research universities and, surprisingly, (mostly) a modest but statistically significant relationship for both revenue and spending at more selective and research institutions. Data limitations make it impossible to check out what is going on here entirely. And even if we are skeptical that the association is causal, what Keltchen’s paper does is throw a wrench in the works when it comes to the idea that public campuses are cashing in on out-of-state students.
So what gives? It’s not fully clear. It may be that public campuses that are not selective or research universities don’t have the market power to pull in out-of-state students who are able and willing to pay. Robert Keltechen notes this but observes that the selective and research findings undercut that idea a bit. Still, I buy it. The trickier thing to do is to explain the negative association at the more prominent campuses. It might be that research universities are buying test scores (and perhaps further donors) rather than raising revenue when they recruit out of state.
I like the paper because it’s a nice study. I also like the article because it supports my priors and arguments I’ve advanced before, and I am susceptible to confirmation bias and like to feel right. For example, one of the things the paper suggests is that public colleges and universities are bad at academic capitalism. That’s a central argument advanced by Shelia Slaughter and Gary Rhoades in Academic Capitalism and the New Economy. Universities simply aren’t good at being businesses, and nowhere in the world is there a thriving, entirely free-market for higher education.
In Unequal Higher Education, Barrett Taylor and I trace the landscape of US higher education over a period of about a decade. We find that over time little changes. The institutions “on top” stay on top. We find little movement between the categories we constructed. Almost all of the movement we found was “downward” and in the public sector and was the result of the loss of state funding. We did find that when public universities lost public funding and drifted into the category we called “vulnerable,” they became more selective and spent more on research. Basically, they started to strive and with the hopes of competing for their way out of precocity. Few suceed. We conclude that competition is not the way out of our higher education woes. Robert Keltchen’s new paper doesn’t address this question directly, but to my mind, it indirectly supports our claim. Want to improve your financial picture by recruiting more out-of-state students? Good luck.
The folly of competition.
If you are a campus leader, and you are promoting to get your institution to “the next level” through shrewd strategy, think again. Or maybe don’t, because keeping your job is predicated on saying you can do it, even if you can’t. But I digress. My point is that when it comes to higher education, there is a folly in competition. Most of the time, anyway.
Want to boost your campus’ research income? Good luck. The universities that win the most federal grant money mostly keep getting the money year after year. Investing in research to get to the next level can boost your productivity in the short term, but few campuses see sustained improvement relative to the field. It’s hard to become the next Stanford. It’s damn new impossibly, actually. The field is pretty darn stable, and there is limited scope for strategic action.
Want to vacuum up online enrollments? Good luck. While this market is not so stable, it is starting to consolidate. A new paper by John Cheslock and Ozan Jaquette shows that large-scale providers - places like ASU and Southern New Hampshire - are getting a larger chunk of the maker share, especially of out-of-state online students, even as the market grows. Online enrollments are consternated in relatively few places relative to in-person programs. So while recruiting lots one out-of-state student might not net you cash, you might not be much more successful recruiting out-of-state enrollments at all. Sure, a few places are going to win and could win big. But most places are not going to become online mega-providers. Or at least it does not seem that way right now.
Want to become a strategic investor and grow your endowment to make it to the big time? Good luck. Campuses that already have mega endowments have an advantage when it comes to growing their war chests further. Your number might come on the MacKenzie Scott roulette wheel, but it also might not.
Want to cash in on the master’s degree craze? Alright, I won’t go there again, lol!
The expectation of leadership.
My point is that we don’t have much evidence at all that strategic competition can dramatically improve institutional fortunes. Not much or not often anyway. So why are campus leaders so committed to the idea that they can do it? Why does your president think they can pull it off? Presumably, because they are expected to. It is part of the corporatization of higher education and the executivization (that is not a word, is it?) of senior administration. Colleges and universities are now expected to do things. That’s why they have a brand; to get things done.
Side note: Under a previous president, my university had ads on the parking lot gates that read: “Who will raise the bar? Spartans Will.” They are gone now.
Anyway, a college can’t just be. It has to be. It has to be going somewhere. It has to be going to the top, to change the world, to deliver a brighter future. (For the record, I am pro brighter future.) And college executives are tasked with delivering on all of that to being. So they do strategy, and so they compete, even if competition doesn’t do much in the way of getting to a brighter future. Even it causes friction and leaves some in-state and low-income students behind.
Ok, enough.
Edited on September 5th to correct errors.
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Brendan Cantwell
Brendan Cantwell @@cant_b

Associate Professor @HALEatMSU and Joint Editor-in-Chief for Higher Education ( Speak only for my self.

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