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Towards the entrepreneurial university: the principal-agent problem

Abstract

The purpose of the paper is to explore how an individualized incentive system could increase professors’ motivation to contribute to the university’s mission to become entrepreneurial in transition countries. The paper proposes a conceptual analysis that draws on the principal-agent problem to examine incentives that may stimulate institutional change. It considers the framework of a university becoming entrepreneurial and assumes that the principal is dean while the agent is a professor. It contributes to the national innovation system literature by providing new insights about the institutional change in transition countries. The contribution is threefold: it distinguishes between an ordinary and an entrepreneurial university, it explains relationship between micro and meso levels in the process of institutional change towards entrepreneurial university, it refines knowledge on individualized incentive system acting as a motivation for professors to contribute to university becoming entrepreneurial. The paper challenges studies that dismiss the micro level role of human agency in institutional change. The conceptual arguments have important managerial implications for all public and private institutions.

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Notes

  1. 1.

    A transition country may be highly developed, but it may still face similar issues to a developing country due to historical path dependencies (Lundvall et al. 2009). The term ‘transition’ is defined as a transformation from a planned socialist economy to a market-oriented economy (Kitanovic 2007).

  2. 2.

    We chose dean as the principal, because deans usually oversee faculty. However, the role of principal in the model could be assigned to other roles depending on the existing institutional structure since it varies country to country.

  3. 3.

    For example: “The mission of Tallinn University of Technology is to be a leading provider of engineering and economics education, as well as a leader in the fields of engineering sciences and smart technologies”. (https://haldus.taltech.ee/sites/default/files/2021-03/Strategic%20Plan%20of%20Tallinn%20University%20of%20Technology%202021-2025.pdf?_ga=2.118765578.2051660872.1622800682-1498313191.1622800682).

  4. 4.

    Drucker (1985) notes three such obstacles: public budget which is awarded based on needs and not on performance; public service agency has to satisfy everyone (compared to consumer who overrides everyone in private firm); seeing the mission as a moral absolute and not as an economic cost/benefits analysis (there is no higher yield).

  5. 5.

    Gibbs (1995) analyzes how middle managers are motivated in large corporations. He is also concerned with the adaptability of the incentive system to changing circumstances.

  6. 6.

    This definition of performance q was inspired by Gibbs’s (1995).

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Staniulyte, J. Towards the entrepreneurial university: the principal-agent problem. Qual Quant (2021). https://doi.org/10.1007/s11135-021-01246-z

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Keywords

  • Entrepreneurial university
  • Institutional change
  • Dynamic capabilities
  • Principal-agent problem
  • Incentive system
  • Transition countries