On innovation: How do revenue variations affect research expenditures within U.S. research universities?

In this study we examine the revenue expenditure relationships within public and private research and doctoral institutions. Results suggest tight relationships between some revenue and expenditure categories. Instructional expenditures are significantly influenced by revenues from tuition and fees, governmental appropriations (for public institutions), and grants and contracts. These results are significant both statistically and substantively. Research expenditures are affected first and foremost by government grants and contracts, and this is especially true at private institutions. Revenues from tuition, appropriation, and private gifts have a rather moderate effect on research expenditure. These results are consistent with the resource dependency interpretation of resource allocation patterns. Although the relationships between some revenue and expenditure categories are tight, the categories themselves are very broad and defined by historical convention rather than current practices and may need refinement.