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Updated 10:00 AM July 10, 2006




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Are elite universities losing their competitive edge?

When it comes to research, elite universities may not be so elite, says a U-M business professor.

In a new study of research productivity of faculty at top 25-ranked U.S. universities, E. Han Kim of the Stephen M. Ross School of Business found that highly rated institutions no longer enjoy a distinct competitive advantage like they did 30 years ago.

"In the 1970s, faculty who worked with better colleagues were more productive," says Kim, a professor of finance at the Ross School. "This effect weakened in the 1980s and disappeared in the 1990s."

The reason? Developments in information technology and the emergence of the Internet. "These advances diminish the importance of cooperation within physical boundaries and greatly facilitate collaboration from distance," Kim says. "As a result, there has been a substantial increase in co-authorship between scholars at elite and other universities."

Kim's study, conducted with Adair Morse of the Ross School and Luigi Zingales of the University of Chicago, examined the research productivity of all economics and finance faculty—more than 3,200—who had been affiliated with top 25 universities from 1970 to 2001 (the researchers averaged university research rankings from 11 previous studies to determine the top 25 list).

They found that among all articles published in 36 economics journals and in the top five finance journals written by scholars at a top 25 school, the percentage of co-authored papers with colleagues from non-elite schools has nearly doubled—from 32 percent in 1970 to 61 percent in 2004.

According to the study, cultural norms have a persistent effect on research productivity—albeit negative. The presence of unproductive faculty members—a proxy for a low motivational work environment—has a strong negative impact on the productivity of other faculty members. "The disappearance of positive university effects suggests that, as far as research productivity is concerned, elite universities are indeed losing their competitive edge," Kim says. "Because of the reduced importance of personal interactions, one traditional advantage of elite universities—to act as a focal point attracting the smartest faculty—is at risk."

Moreover, the researchers found a negative correlation between changes in university effects on faculty productivity and salary changes, suggesting that elite universities are no longer able to retain star faculty on the strength of their reputation alone. In other words, elite universities must pay more to keep their top professors. "Upcoming universities now compete on a more level playing field to attract productive faculty," Kim says.

The researchers say their findings have important implications for knowledge-based industries outside of academia. "What we have documented for universities has also been happening in other industries," Kim says. "Back-office operations are increasingly outsourced overseas. Industries that can provide service over the Internet are breaking out of traditional modes of operation.

"Our results suggest that these breakdowns are only the tip of the iceberg. In the not-so-distant future, many industries may find little need for locational anchors at all."

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