Utilizing Principal-Agent Theory and Data Envelopment Analysis to Examine Efficiency of Resource Utilization in Undergraduate Education for Public and Private Non-Profit Four-Year Research Universities

Abstract

Utilizing a principal-agent model as a heuristic framework and data envelopment analysis as an analytical framework, this study examined relative efficiencies and resource utilization of U.S. Carnegie 15 (very high research activity) and 16 (high research activity) public and private non-profit four-year research universities in the year 2007/08 measured against baccalaureate degree production and graduation rate efficiency. The empirical findings reveal that, on average, overall technical inefficiency for all sets of research universities is primarily attributed to managerial decisions rather than failure to operate at most productive scale size. The results for public Carnegie 15 research universities (PCRU-15s), on average, show that resource utilization is better when measured against baccalaureate degree production than against graduation rate efficiency as indicated by LPTIE scores for all PCRU-15s corresponding with baccalaureate degree production (LPTIE % = 14.22) and graduation rate efficiency (LPTIE % = 22.65). The results for public Carnegie 16 research universities (PCRU-16s), on average, show that resource utilization is better when measured against graduation rate efficiency than against baccalaureate degree production as indicated by LPTIE scores for PCRU-16s corresponding with baccalaureate degree production (LPTIE % = 44.54) and graduation rate efficiency (LPTIE % = 40.58). Comparing the magnitude of LPTIE scores for private non-profit Carnegie 15 research universities (PNCRU-15s) corresponding with baccalaureate degree production (LPTIE %= 8.65) and graduation rate efficiency (LPTIE %= 10.69), results indicate that managerial decisions for PNCRU-15s, on average, are such that resource utilization is better when measured against baccalaureate degree production than against graduation rate efficiency. Consistent with private non-profit Carnegie 15 research universities, the magnitude of LPTIE scores for private non-profit Carnegie 16 research universities (PNCRU-16s) corresponding with baccalaureate degree production (LPTIE %= 8.53) and graduation rate efficiency (LPTIE %= 13.53), results indicate that managerial decisions for PNCRU-16s, on average, are such that resource utilization is better when measured against baccalaureate degree production than against graduation rate efficiency.