An Academic Question

Abstract: Economists have offered several incentive- and risk-based rationales for academic tenure as well as a few attempts to explain the role of faculty in university governance. Missing from the literature, however, is an explanation for why the reputational forces and standard contracting practices relied on in private sector employment relationships are not adequate for addressing incentive problems in academia. Relationship-specific investments do not seem to provide an answer: For the most part, neither teaching nor research is specific to any particular institution. This paper argues, first, that the source of commitment problems in academia lies in the combined research and non-research responsibilities of faculty: The sacrifice of research time today affects the earning potential of faculty over the rest of their career, the size and timing of compensation for which present the same problems posed by relationship-specific investments in other settings. The argument explains why academic tenure and faculty governance did not become prominent features of U.S. colleges and universities until the emergence of research as a primary function of higher education institutions toward the beginning of 20th century; and why both tenure and governance rights are generally restricted to “regular” faculty who perform both teaching and research. The paper then combines data on faculty authority over personnel decisions at over 1,000 U.S. colleges and universities and publication data going back to 1900 to show that faculty authority over hiring, promotion, and dismissal decisions is strongly associated with both the quantity and types of research produced.