Abstract:

The non-profit and for-profit legal classifications of American colleges and universities are powerful constructs. For decades, these two influential categories have fundamentally informed our broader social perceptions of higher education: how lawmakers draft public policies, how philanthropists determine donations, how accreditors conduct audits, how federal and state agencies receive taxes, and how journalists publicly portray organizations. Although market forces have radically changed the higher education landscape during the past two decades, these legal classifications continue to narrowly shape our understanding of post-secondary organizations in dichotomous ways. In a market context where many colleges and universities now seek to establish unique forms of revenue, new ways of understanding the variation in organizational approaches to maximizing profits are needed that go beyond merely “for-” or “non-” profit.

The profit narrative in higher education has predominantly emphasized the exponential growth of the for-profit organizational form and its predatory practices of maximizing revenues. In contrast, categorical assumptions about non-profit universities have constrained whether scholars and policymakers have examined whether similar approaches to maximizing revenues exist in the non-profit higher education sector. And yet, non-profit universities have increasingly blurred the traditional revenue assumptions between the for-profit/non-profit classifications as elite endowments generate billions of dollars in tax-free revenue, elite athletic programs yield sizable merchandising revenue, and public universities have purchased for-profit colleges. The broad non-profit category continues to treat the diverse revenue approaches of universities with uniformity and homogeneity. Financial metrics that identify the margin, or profit, of an organization in other sectors are not employed in higher education because it is argued that calculating a university’s profit and cost are too complex due to multiple revenue streams and public subsidies. However, the tuition-driven university—like the for-profit university—predominantly relies on a single source of revenue supported by student tuition and fees. The unique organizational form of the tuition-driven university provides an opportunity to examine variation in revenue approaches that are embedded within the broad non-profit category. Thus, this paper asks: “Do we need to reexamine existing social categories to further understand the variation in university revenues? Moreover, do non-profit universities follow the same category assumptions?”

To address these questions, this research employs a framework informed by social categories—the socially constructed classifications that influence the actions, legitimacy and perceptions of organizations. It examines the historical revenue patterns of eight tuition-driven universities from 2001-2014. The data highlight four types of approaches the non-profit universities in the sample adopt: Resilience, Survival, Sustainability, and Profitability.

Keywords:

Tuition-driven, non-profit, for-profit, social categories, revenue.