Theoretical Economics Letters, 2012, 2, 337-340

http://dx.doi.org/10.4236/tel.2012.23061 Published Online August 2012 (http://www.SciRP.org/journal/tel)

Academic Crossover and Functional Differentiation of
Universities
Yasumi Abe, Satoshi P. Watanabe
Research Institute for Higher Education, Hiroshima University, Hiroshima, Japan
Email: {yasumi, sw259}@hiroshima-u.ac.jp

Received May 27, 2012; revised June 28, 2012; accepted July 27, 2012
ABSTRACT
This study is motivated by a theoretical deficiency in the research on internal resource allocation and functional differ-
entiation of higher education institutions in relation with their prestige maximizing behaviors. Our finding, despite its
purely theoretical nature, suggests that a prestige-maximizing college or university achieves the highest potential pres-
tige by optimally allocating its limited resources and equalizing the prestige of the closely associated academic depart-
ments or disciplines. The result certainly indicates that the interdisciplinary activities and functional differentiation,
which represent two major efforts found in the recent higher education community, have indeed counteractive effects on
their separate objectives.

Keywords: Academic Crossover; Functional Differentiation; Resource Allocation; University Prestige
1. Introduction
Academic crossover as typified by interdisciplinary re-
search and learning have contributed tremendously to the
creation of new knowledge in nearly every aspect of to-
days multifaceted human activities. At large research
universities in the US, internal resources are strategi-
cally allocated to encourage such cross-disciplinary ac-
tivities to further enhance collaborative research and de-
velopment. Yet, another noteworthy trend found in an
increasingly diverse higher education environment is the
rising importance of differentiating institutions with re-
gard to their missions or functions (Gumport and Bastedo
[1]). For instance, state-funded colleges and universities
with multiple campuses in the US are often concerned
about the cost-effectiveness of their regional system in
funding redundant academic instruction and research
activities (Nelms et al. [2]). A vital question from the
perspectives of public finance and higher education po-
licy, then, is whether or not these two forces, i.e., aca-
demic crossover and mission differentiation, produce
synergetic effects that enhance, or counteractive effects
to impede, the attainment of their separate objectives.
A theoretical foundation laid by Abe and Watanabe [3,
4] provides a mechanism which helps us understand op-
timizing behaviors of colleges and universities with re-
gard to internal resource allocation and maximization of
institutional prestige. Abe and Watanabe [5], using the
same analytic apparatuses further show that different in-
stitutional funding schemes could cause different impacts
on the extent to which functional differentiation is achi-
eved by colleges and universities. However, the theoreti-
cal model developed by Abe and Watanabe hinges on an
additively separable form of prestige functions, for which
each institution of higher education is considered to sim-
ply maximize the sum total of prestige, earned indepen-
dently in separate academic disciplines and/or functional
activities offered by the institution. The additive separa-
bility is an unattractive feature for the analysis, particu-
larly if different academic disciplines, e.g., economics,
physics, and psychology, contribute non-negligibly through
combined efforts to new knowledge production, which in
turn leads to enhancement of academic strengths and
eventually of overall institutional prestige.
This study is motivated by the theoretical deficiency in
the relevant research and addresses the issue by explicitly
incorporating the correlation potentially existing between
different academic disciplines. Our main finding suggests
that academic overlapping across multiple disciplines
within an institution yield a neutralizing effect on the
focus of the involved fields. That is, the result indicates
that collaborative efforts involving multiple departments
could impede functional differentiation of higher educa-
tion institutions.
2. Basic Framework
Preceding studies exist in the literature, which perceive
the industry of higher education as a marketplace where
individual colleges and universities, acting as prestige or
Copyright 2012 SciRes. TEL
Y. ABE, S. P. WATANABE 338
reputation maximizers, offer multiple products and ser-
vices such as student instruction, research output, and
community services, for their stakeholders which include
students, alumni, communities, and governments (Bau-
mol et al. [6], Breneman [7], Brewer et al. [8], Cyrenne
and Grant [9], Del Rey [10]). Abe and Watanabe [3,4], in
particular, demonstrate a mechanism through which op-
timal allocation arrangement of resources is sought by an
institution of higher education in pursuit of the highest
institutional prestige. The proposed model conceives the
total prestige of an institution as the sum of the partial
prestige collected from each field
N
i
P =

( ) i i
p x
( )
1
i i
p x
=
where
represents partial prestige independently earned
esource i
in disciplines 1, , i N = , with x
i
being the correspond-
ing financial r nput. We assume d d 0
i i
p x >
and that an institution allocates its limited reso
1
N
i
urces
i
X x =

so as to maximize its overall prestige.

=
Al-
though the f
hat a university attempts to maximize
a
indings by Abe and Watanabe contribute to a
fundamental understanding with regard to internal re-
source allocation and attainable prestige for colleges and
universities, the additive separability of the prestige fun-
ction certainly limits its full applicability, particularly
when collaborative work by multiple departments jointly
produce synergizing effects on the enhancement of insti-
tutional strengths.
Assume instead t
more generalized form of prestige function ( ) i
P p ,
which is not necessarily an additive separable func f
{ } 1
, ,
tion o
N
p p and satisfies 0
i
P p c c > for 1 i N s s .
ation problem is sim ulated
N
The optimiz p as
{ }
max
i x
P p to
1
,
i
i
ly form
( ) i
subject X x
=
=

(1)
with the required optimality conditions

( ) ( ) ( ) ( ) ( ) ( )
d
d d
k
i i j i i k
j j k k
p
p x x p x x
p x p x
=
c c
(2)
1
,
N
i
i
d
j
p P P c c

X x
=
=

(3)
1 , j k N s s . Then, it is an elementary matter tha
solution is g
N N
persurface

t for
the raphically presented where the possible
prestige hypersurface, represented by a vector
( ) ( ) ( )
, , p x p x , and the iso-prestige hy
1 1
( ) i
P p =
of financi
P , are tange
i
nt with each other, for a given level
resources
1
N
i
al X x =

.
=
g the optim ation problem with
th
In contrast to solvin iz
e additively separable prestige function, an obvious di-
fficulty with the problem (1) is brought out by
j
P p c c
in the first-order condition (2) which may in gen -
volve partial prestige
i
p in fields i j = . In order to
cope with the technical ficulty, we no hat the possi-
ble prestige hypersurface ( ) ( )
eral in
dif te t
( ) 1 1
, ,
N N
p x p x is drawn
solely with allocation dep ffected by
the functional form of
endency and is not a
( ) i
P p . That is, the effect of
changing allocation arrangement { } 1
,
N
x x is captured
by the possible prestige hypersurf as the effect
of the change in the functional form of the prestige func-
tion
ace, where
( ) i
P p is captured by the iso-prestige hypersurface.
Thus ffects of these two changes on the optimiza-
tion may be analyzed and discussed separately.
, the e
3. Analysis
out loss of generality, a heuristically We consider, with
simple case with 2 N = . The loci of attainable prestige
combinations, i.e., ble prestige curve, for a given
amount of institutional funding
1 2
possi
X x x = + , may be
traced by
( )
( ) reas the i
ressed by
2 1 2
;
p
p p p X = , whe so-prestige
curve is exp
( )
( ) 2
;
s
p P for a fixed level
of prestige
2 1
p p =
P .
1
Then, entities are satis-
fied by cons ction:
( ) p X =
the following id
tru

( )
( ) ( ) 2 1 2
;
p
x p p x X (4)

(
( )
( )) 1 1 2
, ; .
s
P P p p p P = (5
Using the identity (4), we derive
( )
)
( )
( )
( ) ( )
( )
( )
( )
2
2
1
2 2
1
1 1
1
1
d
d d
d
d d
d
d d
p
p
d
p
p
X x
p x
p x
x
p
p p
p
x x
x x

= = (6)
from which we obtain
( )
1 2
d d 0
p
p p s since d d 0
i i
p x >
for 1, 2 i = . Similarly, g both s
iden with respect to
1
p gives
differentiatin ides of the
tity (5)
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
2
1 1 1 1 1 2 2
1 2 1
1 1 2
1 2
1
1
1 1 2
2
d
0 , ,
d
,
d
d
,
s
s s
s
s
s
p
p p p p p p p
p p p
P
p p p
p p
p
P
p
p p p
p
= +
c c
c
c
=
c
c
(7)
which also yields
( )
P P c c
1 2
d d 0
s
p p s . As the optimization is
o curves are
( )
sought where the tw tangent,
( )
( )
( ) ( )
( )
2
d P p
( )
( )
( )
( )
1 1 2
1 2 2 2
1
1 1
1 1 2
1 2
,
d d d
d
d d
,
d
s
p s
s
p p p X x
p p p x
p P
p p
x p p p
x p

c
= =
c
c
(8)
certainly yielding the same optimality condition as given
( )
( ) 2 1
;
p
c
in Equation (2) above.
1
For notational simplification, we denote p p X and
( )
( ) 2 1
;
s
p p P
( )
( ) 2 1
p
p
( )
( ) 2 1
s
and p , respectively. p p as
Copyright 2012 SciRes. TEL
Y. ABE, S. P. WATANABE 339
Suppose now that the functional form of P is altered
sl
0
P
ightly from the original form ( ) 1 2 0
, P p p P = which
has an additively separable form of
1 2
p p prestige = + ,
to a more generalized form ( ) ( ) 1 2
, P p p
first-order ap
1 2 0
, P p p P = + .
We then examine the effect -
proximation. The situation is depicted in Figure 1 below.
For ( ) 1 2 0
, P p p P = , the optimality condition at
of P to its
( ) 1 2
, p p
requires


( )
( ) 1 1
d 1 p = as
2
d
p
p p 1
i
P p c c = . For
( ) 1 2
, P p p = + maximize ge is ( , P p p , the d presti ) 1 2
P
attained at
0
( 1 1 2
, p p p + + ) 2
p , where the condition
requires
( )
( )
( )
( )
( )
( )
1 1
1 2
1 1
1
1 1
2
1
2
,
d
d
,
1
p
P
p
p p
p p
P
p
p
p
P
p
p
P
p
p
c
c
+ =
c
c
c
+ +
c
=
c
+ +
c
2 2
2 2
1 1 2 2
1 1 2 2
,
1 ,
p p p
p p p
p p p
p p p
+ +
+ +
+
+
(9)
The new maximum is attained on the identical possible
pr


Figure 1. Shift in the optimizing point as a result of
change in the functional form of prestige function.
estige curve, and the relation between
1
p and
2
p
is written by
( )
( ) 2 1 1 1
p p = = (10)
Expanding the Equation (9) to the first-order approxi
m
2
1
d
d
p
p
p p
p
-
ation with respect to
1
p ,
2
p , and P , and using
the result (10) gives
( )
2 1
2
2
2
1
d
d
p
P P
p p
p
p
c c

c c
= (11)
The slope of the iso-prestige c rve at
1
p

u ( ) 1 2
, p p is
( )
1 2
2
d
1
d
s
1 2 1
p P P p
P
p p p
p
c c c
= +
c
c c
c
(12)
so
1
p may be rewritten as
( )
P c

( )
2
1
1
2
2
2
1
d
1
d
d
d
s
p
p
p
p
p
p
+
= (13)
( )

Since we have
2 2
1 2
d d 0
p
p p < at the maximum
a

Equation (10)) if
( )
1 2
d d 1
s
p p < , and
1
p 0 < (and
0 p > ) for
( p is determ
slope o
) 1 2
, p p , the sign of ined by whether the
the iso-prestig urve at
1
e c f ( ) 1 2
, p p is greater or
smaller than 1 after the change in tional form P. the func
We know with certainty that nd
2
0 p
1
0 p > (a < by
2

( )
1
d d 1 p p > .
4. Impact on Functional Differentiation
ollege
omics
2
s
For a heuristic analysis with N = 2, consider a c
with only two academic departments, e.g., econ
and physics, maximizing the objective function
( ) 1 2
, P p p which explicitly involves the correlation term
( ) ( ) 1 2 1 2 1 2
, , P p p p p p p = + + (14)

( The last term ) 1 2
, p p represents the
between the two disciplines and is assumed to satisfy 1
correlation
)
( ) ( ) 2 1
0, , 0 p p 0 = = ; 2)
respect to p for 1, i
( ) ( ) 1 2 2 1
, , p p p p = ; 3)
differentiable for an appropriate number of times with
i
2 = ; and 4)
1
0 p c c > ,
2
0 p c c > .
Using th esult in Equation (7), e r
( )
( )
) ( ) (
( )
( )
( )
( )
1 1 2
1 2
1
1
1 1 2
2
,

d
1 ,
s
s
p
p
p
p p p
p
=
c
+
c
(15)

yielding
( )
( )

1
d
s
p p
p p
c
+
c
1 1 2
d d 0
s
p p p s . Since is symmetric in
i
p , i.e., ( ) ( ) 1 2 2
, , p p p p = , we have
1 1
p c c =
2
p c c for
1 2
p p = . Therefore, we obtain
( )
1
d d
s
p p
1
2
en
( )
2
s
p p = wh =
1
.
We c a situ rsity enco
ages ciplinary activities and further assume that
onsider ation in which a unive ur-
cross-dis
( ) 1 2
, p p is monotonically decreasing in
1 2
p p ,
which means that the correlation term takes larger values
els of prestige for the two disciplines e
closer. In order to represent this property more precisely,
we use the following variables instead of
1
p and
2
p :
as the lev becom
Copyright 2012 SciRes. TEL
Y. ABE, S. P. WATANABE
Copyright 2012 SciRes. TEL
340
( )
( ) 1 2
1
2
p p p
+
= +
( )

In ter s of p

and p
+
, the above-mentioned condition

1 2
1
,
2
p p p

=
16
m
n by

is give for 0 p

c c > 0 p

s and 0 p

c c s
for 0 p

> . Since
( )
( ) 1 2
1 2 p p p

c c = c c c c ,
it follows that

1 2
p p > c c c for
1 2
c p p s , and
1 2
c c fo t p p c s c r
1 2
p p > . This indicates in turn tha
( )
1 2
d d 1
s
p p s d
( )
for
1 2
p p s , an
1
s
> r
1 2
p p > .
Therefore, c ing the t with the fin -
tained in the third section, the optimizing solution with
co
s that
2
d d 1 p p fo
ombin resul ding ob

rrelation is necessarily located closer to the diagonal
array
2 1
p p = than the optimization attainable by the
prestige function without the correlation term. The result
indicate , when the conditions 0 p

c c > for
0 p

s and 0 p

c c s for 0 p

> are satisfied,

2
a
university with two associated academic fields s an
incentive to allocate its i ternal o es so as to gain an
equal level of prestige in both fields. Thus, the result
suggests that the functional differentiation among uni-
versities becomes more difficult when they manage the
identical set of correlated disciplines and/or institutional
activities than otherwise.
5. Conclusion
ha
n res urc
the potential outcome for an institu-
overlapping among multiple
ank an anonymous referee
ns. The basic concepts and
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This study predicts
tion with cross-disciplinary
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functional differentiation is achieved. Our finding, de-
spite its purely theoretical nature, demonstrates that there
exists a compelling force for a prestige-maximizing in-
stitution to make an internal allocation arrangement so as
to gain the equal level of prestige for separate but corre-
lated disciplines/departments. The result certainly indi-
cates that the academic crossover and functional diffe-
rentiation, which represent two major trends observed in
the recent higher education industry, have counteractive
effects on the attainment of their separate objectives. The
analysis is also readily applicable to other scenarios, such
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The authors would like to th
for comments and suggestio
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authors was a visiting scholar at the Center for Studies in
Higher Education (CSHE), University of California, Ber-
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( ) ( ) 1 2 1 2
,

2
For example, p p p p = 0 > , satisfies the conditions.