Dynamic capabilities and governance: An empirical investigation of financial performance of the higher education sector

Research Summary We postulate that resource allocation decisions consistent with dynamic capabilities can improve financial performance, but that governance moderates the relationship between resource allocation flexibility and financial performance. Using more than a decade of data on US public uni...

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Bibliographic Details
Published in:Strategic management journal 2023-02, Vol.44 (2), p.520-548
Main Authors: Heaton, Sohvi, Teece, David, Agronin, Eugene
Format: Article
Language:English
Subjects:
Autonomy
Colleges & universities
dynamic capabilities
Financial performance
Flexibility
Governance
Higher education
higher education industry
Resource allocation
Strategic management
Surpluses
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Summary:Research Summary We postulate that resource allocation decisions consistent with dynamic capabilities can improve financial performance, but that governance moderates the relationship between resource allocation flexibility and financial performance. Using more than a decade of data on US public universities, we find that flexibility has much more impact when matched by lower levels of governance that allow greater expenditure autonomy for university executives and administrators. Managerial Summary Organizations are increasingly subject to conflicting demands imposed by their institutional environments. Given the importance of governance arrangements, we apply strategic management concepts to public universities and investigate the effect of external governance arrangements on university performance. We show that universities that reallocate resources more regularly are more likely to run larger budget surpluses. This is far more likely to be true at universities where external governance arrangements allow greater executive discretion.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.3444