Analysis of Changes in Total Factor Productivity for Academic Departments of Historically Privileged Small University in South Africa

Abstract

In an environment of rising levels of student debt and falling government financial support to universities, the problem of lack of financial sustainability is becoming endemic, especially among small universities. This calls for universities to identify new sources of income growth. Using a case study of a small historically privileged South African university, we examined the change in total factor productivity for the period 2004-2015. We adopted an intra-institutional departmental efficiency comparison using the Malmquist Total Factor Productivity Index under an output-oriented data envelopment analytic framework and assuming variable returns to scale. The index was decomposed into technical efficiency change, technical change, pure efficiency change, and scale efficiency change. We found that total factor productivity growth was driven by technical progress, scale efficiency improvements and to some extent technical efficiency improvements. Departments in the Faculty of Science mostly seem to have experienced greatest levels of technical change although they lagged the Department of Accounting. Because of the dominance of technical change in driving total factor productivity growth, an important source of income growth, our findings imply that universities should design institutional systems of innovation that can engender financial sustainability through increased innovation and total factor productivity growth.

Keywords: Total factor productivity, scale efficiency, technical change, technical efficiency, South Africa, historically privileged small university

DOI: 10.7176/EJBM/12-18-02

Publication date:June 30th 2020