The business model of American research universities

 

Ever since I graduated high school, I’ve been associated with one or another research university, either as a student, a postdoc or a faculty. And during nearly all of that time, I was engaged in some form of research.

William Rouse wrote a book in 2016 entitled “Universities as Complex Enterprises: How Academia Works, Why it Works These Ways, and Where the University Enterprise is Headed.” He updated and summarized his research in a paper published with two colleagues in late 2018 in The Proceedings of the National Academy of Sciences. During this time, I was the Associate Dean for Research at the medical school where I worked, so I read both the book and article, and shared them with the university CFO and the President. I doubt it had any effect.

To distill it down to a couple essential points:

• Research is always and everywhere a cost center for a University. While grant funding can cover some or most project salaries and benefits, as well as supplies and overhead, the net cost to the university of any funded research is greater than that recovered on the grant;

• Research universities subsidize the research enterprise in three or four ways:
           tuition

licensing of inventions

philanthropy

[for some research universities with medical schools, the margin on the practice]

So why do research universities do research? The positive externalities of reputation as a research university. When parents talk about sending their kids to a “good university,” they’re generally referring to a research university. Never mind that their kids will probably not do any research, they graduate with that brand. Talented faculty are drawn to research universities—after all, that’s where they trained and where most of their peers are. And donors are drawn to the reputational associations of scholars. So research university faculty are flogged to get the next big research grant and administrators are driven to commercialize the research brand. Very little of this trickles down to the level of actual, you know, university students.

Rouse is concerned that the current number of research universities is unsustainable, and many will have to abandon the mission as too expensive. While he makes a compelling case for this in his PNAS article linked below, I have to say that since that article was published, I’ve seen a number of small colleges close or merge, but I haven’t seen many research universities abandon the brand. Maybe when Trump comes to power and implements the Heritage Foundation’s Project 2025, we’ll see these concerns realized.


https://www.pnas.org/doi/epdf/10.1073/pnas.1807174115