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The Higher Education Industry

From an industry economics perspective, a university is a "business" in the global higher education industry. They are also "communities of scholars, but the reality is that a modern research university is a “very complex, international conglomerate of highly diverse businesses.  

The larger universities manage very large budgets with increasing amounts of discretion. But they are far more complex than most industrial corporations, undertaking many activities - some for profit, some publicly regulated, and some operating in highly contested markets. 

In addition to teaching and undertaking research, universities provide publishing services (academic presses), health care (through general practice clinics and teaching hospitals), collaborate with businesses in research and development, participate in economic development activities (including technology parks and precincts), stimulate social change, and provide sporting facilities and entertainment venues. Universities also have a wide range of investments in commercial property, securities and equities.

From a policy perspective, it is important to understand universities from both the academic perspective and the business and financial realities. 

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Current Projects

Rethinking Higher Education - Phase 2

Little has changed since our ebook Rethinking Australian Higher Education was published in February 2021. Request Paper The recent Australian Universities Accord Report is largely premised on the continuation of the existing industrial structure. 

The higher education industry has experienced rapid growth, and over the last 10 years has been in a “bubble” situation with an extraordinary increase in revenues from international students. Like bubbles in other industries, it encouraged both hubris and complacency in an expectation that the growth pattern would continue. It obscured underlying weaknesses in domestic demand and university strategies and problems with overloaded management and administrative inefficiencies.

This project will continue with the analysis of the industrial structure of higher education in Australia suggested in Rething Australian Higher Education using the Michael Porter Five Forces and other industry analysis frameworks. 

Update and Comment on University Finances

For many years the Acton Institute has been analysing trends in the financial position of universities.  There is now a considerable database of universities' financial structures.

There is a tendency to see university finances only in terms of the Income Statement. Audited results vary considerably from year to year, depending on the impacts of accruals, especially depreciation and provisions, and investment valuations, Most universities aim for an operating margin of 6 per cent, which they tend to achieve over extended periods.

Many universities are asset-rich, holding valuable property portfolios and accumulating substantial financial assets.  They now issue their bonds and securities and enter into long-term public-private partnerships for capital projects. Credit ratings are generally very high.

Universities are substantial "cash flow" businesses, earning income from student fees and government grants, with the major expenditures being on wages and salaries and external suppliers.  Our data shows that over the last 20 years, there have been very few occasions when a university has recorded a cash flow deficit. 

There are, nonetheless operational financial pressures, and universities will need to look for supplementary sources of revenue, new lines of business, and new ways to communicate their important social, cultural and economic roles in their communities and regions. 

They will need to adjust their narratives with the business community and engage as partners in developing ideas and opportunities to grow. They must find champions in the private sector to help make the case for university education on their behalf. 

This project will examine the nature and extent of institutional change and adjustment that will be required in the university business model built around the Hampster Wheet of "Publish or Perish".  

Escaping the "Public or Perish Syndrome

Decades ago, academic publishing was simply a way for universities to share knowledge and contribute to the academic community. Academics were generally appointed with permanent tenure, and influential publications, often published by university presses, were a marker of eminence and prestige.

 

This evolved as publication records and citations became a key criterion for hiring, promotion, tenure decisions, and grant funding. More recently, publications and citations have become central metrics in international university ranking systems.

Over the years, numerous reports and papers have seriously attempted to shift the Publish-or-Perish culture, but their impact has been limited.  Studies and discussions have contributed valuable insights into the limitations of the culture, including the recent work from ACOLA. But the dial has not shifted, and many apparently insurmountable barriers stand in the way. These can be shifted with time, resources, and commitment.

Over the longer term, however, greater diversification in Australia’s higher education landscape would seem to be the only viable strategy to permanently escape the Publish-or-Perish Hamster Wheel with its constraining impact on innovative and paradigm-shifting research. This diversification could involve stronger support for universities specialising in applied sciences and technology, requiring much less focus on global rankings and more on industry collaboration.  

This project looks at how strategically targeted public and industry research investment would reduce the pressure to obtain research income from international students in these institutions.

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