Do competitively acquired funds induce universities to increase productivity?

This paper analyzes the impact of private and public third-party funds on the productivity of Swiss university departments and public research institutions. Estimating a production function assuming that labor inputs produce master students and scientific publications reveals a positive effect of public third-party funding on productivity but not for private funds. However, once we include technology transfer as an additional output, the coefficient for public third-party funding turns insignificant while private funding becomes significant, indicating that the disciplining effect of public donors focuses on publications while private donors foster technology transfer. We employ three alternative approaches to tackle endogeneity and find qualitatively robust results.

Research highlights▶ Choice of output measure crucial for effect of third party funding on productivity. ▶ Public third party funding increases research productivity, private funds insignificant. ▶ Private funds significant, public funds insignificant if technology transfer is accounted for. ▶ 3SLS estimation of parts of aggregate output measure shows reason for change in significance.