A test of resource dependency theory using higher education institution behavioral changes after state based merit aid adoption

Abstract

The purpose of this study was to analyze whether four-year, public institutions altered their behaviors as their revenue streams changed. I utilized state based merit aid adoption to examine whether institutions altered their functional expenditures and faculty employment behaviors as institutions became more resource dependent on students. The dependent variables concerning functional expenditures analyzed were instruction, research, student services, public services, academic support, institutional support, and scholarships. The dependent variables concerning faculty employment analyzed were part-time faculty, full-time non-tenure-track faculty, and fulltime tenure-track faculty. A difference-in-difference estimation strategy estimated institutional responses to a merit aid program being adopted in their state. The findings indicated that after merit aid adoption in their state, institutions altered their behaviors in ways that indicated they became more resource dependent on students. Specifically, the models indicated that, on average, institutions in states that adopted a merit aid program spent more money on instruction, institutional support, and scholarships and employed more part-time faculty than institutions in states that did not adopt any merit aid program. The findings of this study suggest that if states direct funds to students that institutions will respond as though the students provide the funding and not the state.