Strategic Management of Higher Education Enterprises

Abstract: Educational institutions are becoming increasingly important for regional and national economies. Recent developments in Europe have drawn attention to the need for elite institutions. After a long domestic debate, Germany appointed three of its universities to Eliteunis in the fall of 2006. Similar discussions and initiatives have taken place in Finland and Denmark. In 2007, the Swedish university chancellor, Anders Flodström, initiated a public debate about improving the Swedish system of higher education by concentrating it to fewer institutions of higher quality. As a contribution to these discussions, it is of general interest to understand why and how educational institutions become successful. The purpose of this study is therefore to investigate what strategy and external factors that has made one particular institution – Massachusetts Institute of Technology – successful. The findings of the study show that MIT’s success depends on the possession of several important strategic resources: faculty and student quality, endowment, reputation and campus location. Thanks to these resources, in combination with some external factors, primarily the influx of large amounts of federal research funding and the (entrepreneurial) success of MIT alumni, the Institute has been able to attract: federal and private research funding, donations and more high quality faculty and students. Faculty are motivated to excel through a well-devised promotion and incentive system. There is a strong virtuous cycle dynamic between the resources. For example, an institution with strong reputation will attract good students and faculty. This will lead to increasing faculty and student quality which will improve the reputation further. To enter the virtuous cycle, significant financial resources are required. MIT, received much of these resources through the immense research efforts that were funded by the U.S. government during World War II, the Space Race and the Cold War. This enabled MIT to attract excellent faculty and build its reputation.