The Impacts of Financial Resource Allocation Mechanisms on Educational Performance of University Departments: The Case Study of University of Tehran

Higher education has increasingly been in line with the progress of societies, and many countries have recently given priority to knowledge-based economy. “How to improve the effectiveness of the universities to achieve the knowledge-based economy” has been as a major challenge for managers and planners who have applied various policies and programs among which the changes in the mechanisms of financing and financial resources allocation are considered to be crucial, in that the mechanisms affect the performance of educational departments which are the main pillars of the universities and higher education system. Nevertheless, we empirically know little about the impacts of the changes. Thus it is important to evaluate the impact of the mechanisms on educational performance of the departments, which is the main objective of this article. Taking into account the advantages of university of Tehran as a case study, we selected 75 educational departments located in Tehran city as the units of analysis. Data on the characteristics of the educational groups for 2001-2005 period were collected through conducting a field work (questionnaire) and using the faculty members’ profiles. Due to the complexity of data structure and to achieve correct hypothesis testing, we apply multilevel modeling through which the heterogeneities across the groups are taken into statistical models. The results of empirical analyses show that (1) educational performance among the departments has significantly been heterogonous; this heterogeneity indicates that the structure of data used is complex and dominated by a hierarchical structure which makes the application of multi-level modeling method imperative, (2) the educational performance has had a constant and considerable increase during the period, (3) each group has experienced different trend in their educational performance during the period, and (4) among the explanatory variables studied, we found that financial resources allocation mechanisms positively and significantly affect the educational performance of the departments. Our main findings indicate that changes in funding and financial allocation mechanisms (especially in terms of collecting tuition fees) affect educational performance of the educational groups which provide evidence on the fact that the groups do respond to the financial mechanisms and incentives, considering their current financial constraints to meet their educational goals. Therefore, policy-makers and managers can consider the financial mechanisms as an effective and indeed a complementary tool for achieving good governance and perfect steering to improve the effectiveness of the educational departments.