Universities Between Revenue and Status: a Typology of Organizational Responses

Abstract

Prior research on behavioral responses to performance has provided limited attention to how different types of performance outcomes interact to affect organizational reactions. Focusing on the pursuit of revenue and status goals by private universities, we offer a typology of organizational responses (i.e., reducing ambitions, compensatory strategies, and complementary use of slack to pursue new opportunities) which are shaped by the set of challenges and capabilities that poor and superior performance in these goal dimensions present. When poor performance in both revenue and status leads to different types of liabilities that together result in a low likelihood of recovery, universities respond by reducing ambitions and diversifying into a lower status market segment, which offers a more promising path to survival. In response to a mixed performance outcome in revenue and status, universities employ compensatory strategies where they make use of the achievement in one goal dimension to repair the damage in the other. Finally, universities expand the scope of activities when they achieve superior performance in both goals, and the resulting slack in revenue and status provides complementary capabilities to pursue new opportunities. These findings extend the early Carnegie proposal and indicate that the portfolio of organizational responses to performance gaps may be broader than previously considered. © 2023 European Academy of Management.