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Competing in the Higher Education Market: Empirical Evidence for Economies of Scale and Scope in German Higher Education Institutions

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  • Maria Olivares

    (University of Zuerich, Department of Business Administration, Switzerland)

  • Heike Wetzel

    (University of Cologne, Institute of Energy Economics, Germany)

Abstract

Since the late 1990s, the European higher education system has had to face deep structural changes. With the public authorities seeking to create an environment of quasi-markets in the higher education sector, the increased competition induced by recent reforms has pushed all publicly financed higher education institutions to use their resources more efficiently. Higher education institutions increasingly now aim at differentiating themselves from their competitors in terms of the range of outputs they produce. Assuming that different market positioning strategies will have different effects on the performance of higher education institutions, this paper explores the existence of economies of scale and scope in the German higher education sector. Using an input-oriented distance function approach, we estimate the economies of scale and scope and the technical efficiency for 154 German higher education institutions from 2001 through 2007. Our results suggest that comprehensive universities should indeed orientate their activities to the concept of a full-university that combines teaching and research activities across a broad range of subjects. In contrast, praxis-oriented small and medium-sized universities of applied sciences should specialise in the teaching and research activities they conduct.

Suggested Citation

  • Maria Olivares & Heike Wetzel, 2011. "Competing in the Higher Education Market: Empirical Evidence for Economies of Scale and Scope in German Higher Education Institutions," Working Paper Series in Economics 223, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:223
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    3. Lutz Bornmann & Klaus Wohlrabe & Sabine Gralka, 2019. "The graduation shift of German universities of applied sciences," PLOS ONE, Public Library of Science, vol. 14(1), pages 1-19, January.
    4. Sabine Gralka, 2018. "Persistent inefficiency in the higher education sector: evidence from Germany," Education Economics, Taylor & Francis Journals, vol. 26(4), pages 373-392, July.
    5. Dorys Y. Rodríguez-Castro & Juan Aparicio, 2021. "Introducing a functional framework for integrating the empirical evidence about higher education institutions’ functions and capabilities: A literature review," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 17(1), pages 231-267.
    6. Maria Olivares & Andrea Schenker-Wicki, 2012. "The Dynamics of Productivity in the Swiss and German University Sector: A Non-Parametric Analysis that Accounts for Heterogeneous Production," Working Papers 309, University of Zurich, Department of Business Administration (IBW).
    7. Gralka, Sabine & Wohlrabe, Klaus & Bornmann, Lutz, 2017. "The Completion Shift of German Universities of Applied Sciences," MPRA Paper 82794, University Library of Munich, Germany.
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    9. Wohlrabe, Klaus & Bornmann, Lutz & de Moya Anegon, Felix, 2017. "Wie effizient sind Universitäten in Deutschland, deren Zukunftskonzepte im Rahmen der Exzellenzinitiative ausgezeichnet wurden? Ein empirischer Vergleich von Input- und Output-Daten zur Forschung [," MPRA Paper 76218, University Library of Munich, Germany.
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    More about this item

    Keywords

    Higher Education Production; Economies of Scale and Scope; Technical Efficiency; Stochastic Frontier Analysis; Input Distance Function;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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