Interests, Information, and Incentives in Higher Education: Principal-Agent Theory and Its Potential Applications to the Study of Higher Education Governance

Abstract

How do governance structures impact university actions? Why does it matter if a governance structure is centralized or decentralized? How does an institution respond to a governor and legislature with differing higher education agendas? Why are some campus activities politically significant while others go unnoticed? Is a university more responsive to a government that provides annual appropriations or students who are paying an increasing portion of university expenses? While some scholars (e.g., Lowry, 2001; Nicholson-Crotty & Meier, 2003; Payne & Roberts, 2004; Toma, 1986, 1990) have provided evidence that suggests the way in which governance structures are organized can impact policy outputs, theoretical explanations for this finding have been modest.PAT focuses on the relationship between entities, either individuals or organizations, and can be used to understand motivations behind the activities of actors within hierarchical and contractual relationships. Among other areas of inquiry, the PAT can be useful for investigating and explaining why universities respond to legislative action in different ways, the impact of competing demands from different government officials on the decision making of institutional officials, and how bureaucratic governance arrangements can alter policy effectiveness and institutional autonomy.