The Effect of Performance-Oriented Funding in Higher Education: Evidence from the Staff Recruitment Budget in Italian Higher Education

This study, which aims to investigate some potential effects derived from the adoption of performance-oriented funding in the higher education system, is focused on competitive allocative mechanism to provide universities with the staff recruitment budget in the Italian Higher Education System using panel data spanning the period 2012-2018 for 58 public universities. Results show that the geographical area in which universities operate influences their capacity to increase performance and thus financial resources. Indeed, universities located in Northern areas, the wealthier part of Italy, received a higher amount of resources than those located in the rest of the country. These findings reveal the key role played by external factors, which are beyond the control of management, in universities' capacity to achieve better performance. Results also suggest that policy-makers should identify the correct trade-off between the quest for higher performance within the Italian Higher Education System and equity in resource allocation.