Mergers in higher education: Implications for efficiency

Rising tuition fees and pressures on public funding caused by austerity have increased the need for efficiency in English higher education. Merging has been suggested as a way of increasing efficiency, but little is known of merging effects in higher education. Using a panel of data on all English universities and containing more than 20 incidences of merger, this paper uses frontier estimation techniques to assess the productive efficiency of higher education institutions in England. In a second stage various econometric techniques are applied to assess the effect of merging on subsequent efficiency.
The findings suggest that merging institutions are significantly more efficient, on average, than non-merging ones. However, once other possible factors of efficiency and the two-way relationship between efficiency and merger (specifically, merger might lead to greater efficiency, but efficiency itself might lead to a higher propensity to merge) are taken into account, it appears that any efficiency gains from merger are short-lived (possible lasting only 2 years). Various caveats of the analysis are discussed.