Specific investments, cognitive resources, and specialized nature of research production in academic institutions: why shared governance matters for performance

Abstract

New institutional economics (NIE) studies institutions and how they emerge, operate, and evolve. They also include organizational arrangements, intended as modes of governing economic transactions. Universities offer an exciting ground for testing the role of different institutional arrangements (governance forms) in coordinating (academic) transactions. In a context of contractual incompleteness where production is characterized by a highly specialized nature and requires the cooperation among co-essential figures, we argue that shared governance models (versus models with more concentrated authority) foster idiosyncratic investments in human capital and promotes performance. From the evolutionary viewpoint, we explain why institutions based on shared governance have developed within universities. The normative question of how universities should be governed is a debated issue in the literature. Since the 1980s, the new public management paradigm provides a theoretical framework that suggests analyzing university like firms. It is based on the firms archetypical conception as top-down hierarchical organizations and as a descending sequence of principal-agent problems. We advance a different interpretation of the university-firm analogy leveraging on the NIE and its developments. To empirically analyze our hypothesis, we collected original data from Italian universities in 2015. We find that more shared decision-making processes are correlated with better research performance.