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Instituto Valenciano de Investigaciones Económicas


University merging process
WP-AD 2013-01
University merging process
Hidalgo, M. y Valera, G.
Año de publicacion: 2013
Palabras clave: Higher Education, University Competition, Mergers, University Funding System.
Clasificación JEL: H52, I22, D78, I23
There is a recent tendency toward encouraging universities to merge. This policy is based on the idea that mergers create synergy gains that enhance universities’ prestige by increasing their international visibility. However, this process may reduce competition for both research funds and professors. This paper analyzes whether or not mergers among universities are optimal from an aggregate excellence point of view. We find that the relationship between cost differentials of competing universities, the amount of research funds and universities’ recruitment standard plays a key role when comparing aggregate excellence in a merging and a competition settings. In particular, we show that the higher the heterogeneity between potential merger institutions in terms of their reputation the greater the amount of funds needed to make mergers profitable.