Theoretical Model for Applying Agency and Resource Dependency to Public Higher Education

The purpose of this study was to provide a theoretical model for public higher education. Significant financial challenges are affecting the future of the public higher education sector of the United States. With a decline in enrollments in conjunction with minimal increases in state funding sources, many have speculated what the future holds for these institutions. The agency theory and resource dependency theories can be utilized to research these topics. Agency theory describes a relationship between a principal, in this case the individual states across the U.S., and an agent, the public higher educational institutions, whereby the agent performs duties on the principal's behalf. The institutions provide educational opportunities for the citizens of the respective state for appropriate funding allocations from the state's budget. The resource dependency theory describes the behavioral implications on organizational processes of being dependent on a limited number of resources. For public higher education systems, they are dependent upon two major sources of income: state appropriations and student tuition. The balance between these income sources can impact the principal/agent relationship between the state and their respective higher education institutions.