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The impact of performance funding on institutional performance over time: evidence from South Korean universities

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Abstract

Performance funding for higher education has gained popularity in many countries, but its impact on institutional performance remains unclear. This study investigates the impact of performance funding on the institutional performance of Korean universities over time. The institutional performance indicators used include graduates’ employment rate, student retention rate, financial aid per student, expenditure per student, and faculty-to-student ratio. Using longitudinal data of 160 4-year universities from 2008 to 2013, we employed a multilevel growth modeling strategy. The results indicate that institutions with more funding through the Education Capacity Enhancement Program sustained higher employment rate, retention rate, and faculty-to-student ratio in 2013, while employment and retention rates of less-funded institutions grew faster over time after controlling for 2008 status and institutional characteristics. This evidence demonstrates that the performance funding program in Korea encouraged institutions to focus on the most important performance indicators, resulting in a funding effect and a motivational effect. We suggest policy implications for the future development of performance funding as well as appropriate use of performance indicators.

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Notes

  1. In 2014, the Education Capacity Enhancement Program was replaced by a new funding scheme, entitled “University for Creative Korea,” which determined grant recipients based on a proposal and performance indicators such as employment rate and retention rate.

  2. For example, funds for each recipient institution in 2013 were determined by a formula, which is the multiplication of four components: average expenditure per student (11,296 thousand Korean won), square root of enrollments, weighted sum of performance indicators, and regional coefficient (Seoul: 2.8 vs. non-Seoul: 4.5).

  3. Changes in the sample may affect the estimation results. For example, if the excluded institutions are disproportionately low-performing institutions, it is likely that the estimates will be upwardly biased.

  4. For example, employed graduates certified by the health insurance database were counted in 2010. Graduates employed overseas were added in 2011, and graduates working in agriculture were added in 2012 and 2013. As of 2013, the overseas employment rate was 0.28 %, while the employment rate in agriculture was only 0.05 %.

  5. Korean universities are assigned, by the government, an approved number of students who may enroll. For comparison, the retention rate in the USA is defined as a measure of the rate at which students persist in their educational program at an institution, expressed as a percentage (US IPEDS accessed January 5, 2015). The Korean retention rate is assumed to indirectly indicate institutional attractiveness or students’ satisfaction level, and consequently educational quality.

  6. Teacher education institutions are not considered separately in this paper based on a preliminary analysis indicating that the coefficients were not different with versus without teacher education institutions.

  7. Note that additional covariates are not adjusted for the cubic term for model parsimony. However, the additional covariates were not significant and did not affect the estimate of γ 30.

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Authors and Affiliations

  1. Department of Education, Hongik University, 94 Wausan-ro, Mapo-gu, Seoul, 121-791, South Korea

    Pilnam Yi & Junyeop Kim

  2. Seoul, South Korea

    Jinsook Kwak

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  1. Pilnam Yi
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Correspondence to Pilnam Yi.

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Yi, P., Kwak, J. & Kim, J. The impact of performance funding on institutional performance over time: evidence from South Korean universities. Asia Pacific Educ. Rev. 16, 501–515 (2015). https://doi.org/10.1007/s12564-015-9401-x

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  • DOI: https://doi.org/10.1007/s12564-015-9401-x

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