Performance Differences in German Higher
Education: Empirical Analysis of Strategic
Department of Economics, University of Konstanz, P.O. Box D-144, D-78457 Konstanz,
Abstract. Initial investments and diﬀerent strategic actions of universities lead to their dif-
ferent positions in the higher education sector. Pursuing similar strategies leads to similar
positions that inﬂuence structure and performance within the system. Institutions cannot only
choose to focus on research or on teaching, but also to focus either on natural sciences or
social sciences. Using 73 public universities in Germany, this paper examines the existence of
strategic groups based on performance. Common strategic variables only partly determine
performance in high and low eﬃciency groups.
Key words: Higher education, performance measurement, strategic groups
JEL Classiﬁcation: 121, L30, M11.
German per capita income growth has been relatively low as compared to
other European countries or the US. One of the many explanations for this
diﬀerence could be the eﬀectiveness and eﬃciency of a country’s educational
system. From this perspective, universities generate spill-over eﬀects from
their academic research and teaching (Audretsch et al., 2003), thereby stim-
ulating economic growth. Indeed, the close nexus between the university
system and economic growth has turned much attention to the eﬃciency and
quality of German universities. The low competitiveness of German univer-
sities may be responsible for the ‘‘brain drain’’ of high skilled researchers that
has led to a situation in which not only the number of Nobel prizes awarded to
researchers of German nationality has declined, but also that the odds that
German Nobel Prize winners have conducted their research at foreign uni-
versities has grown. Finally, and perhaps most importantly, international
university rankings based on publications and citations do not place German
institutions among the top rank (see Kalaitzidakis et al. (2001) for economics).
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Review of Industrial Organization 24: 393–408, 2004.
Ó 2004 Kluwer Academic Publishers. Printed in the Netherlands.