Financial decentralization and third-Mission outputs: A comparative study of Higher Education contexts in Brazil and the United States

Abstract

Third Mission (TM) drives universities to a purpose beyond their traditional role, especially in local socioeconomic and innovation ecosystems. To investigate the issue, we consider an exploratory and comparative study of two different governance systems of public universities (Southeast Brazil-region 1 and Texas-US-region 2). The comparison took into account data from international universities' rankings performance to address TM and the structure of financial sources to address financial decentralization. The available evidence seems to suggest a positive association between the level of financial decentralization and the capability of the system of HE to deliver TM outputs. Universities under decentralized governance structures, which permit more autonomy to manage their resources, presented better results in most selected TM indicators. These findings reinforce the general belief that the governance arrangements that allow exploring synergies within local business ecosystems are more appropriate for ensuring organizational changes in the direction of entrepreneurial action.

Keywords

Science,technology and innovation entrepreneurial university regional ecosystems comparative study university industry and government collaboration policy evaluation

Introduction

The Third Mission (TM) is a multidisciplinary concept that drives universities toward a purpose beyond the missions of teaching and academic research to capture their relevance in facing public challenges, especially in their local socio-economic ecosystems. TM has increasingly pressured Higher Education Institutions (HEIs) to (i) commit to socio-economic development in their territories (Pinheiro et al., 2017), adapt their organizational structures to respond to partner's needs (Sánchez-Barrioluengo and Benneworth, 2019), and (iii) encourage creation and diffusion of innovation and entrepreneurship practices among faculty, staff, students, and communities (Benneworth and Dauncey, 2016; Nelles and Vorley, 2010; Vorley and Nelles, 2008). TM shares a similar meaning with third-stream activities (Fuller et al., 2019). This approach is grounded in the knowledge economy, globalization, and financial crises (Compagnucci and Spigarelli, 2020).

Compagnucci and Spigarelli (2020) present TM as a wide range of activities that address universities' economic and social missions. Based on a systematic literature study, the authors summarize TM activities as those related to patenting, knowledge transfer, partnerships with industries, academic spin-off creation, incentives for innovation, and entrepreneurial education. Vorley and Nelles (2008) affirm that the entrepreneurial university is a TM framework. Indeed, the concept of the entrepreneurial university has catalyzed the enhancement of TM activities with two main objectives: (i) encouraging universities to actively search for opportunities associated with technology transfer, commercialization of patents, industry partnerships, startup incubators, and spin-off incentives (Etzkowitz and Zhou, 2021; Foss and Gibson, 2015; Fuster et al., 2019; Muizniece, 2021) and (ii) employing entrepreneurial education to support a culture aligned with TM activities (Passaro et al., 2018).

Several studies have demonstrated the positive effects of TM activities on the quality of teaching/research and the collaborative-responsive relations between universities and economic, governmental, and societal actors (Etzkowitz and Zhou, 2021; Klofsten et al., 2019; Sánchez-Barrioluengo and Benneworth, 2019). Evidence has shown that the engagement of universities with local businesses and community leaders is essential for the regional environment and positively impacts the primary missions of teaching and research (Nelles and Vorley, 2010; Quoc et al., 2021).

However, many other studies express concerns about the increase the TM strategies and their effects on the role of universities. Pressures on universities have arisen from the need to demonstrate their relevance to society. TM offers a way to apply strategic management as it allows for exploring performance indicators such as the number of registered patents, the number of partnership contracts, the amount of externally captured resources, and the number and value of launched startups. However, Slaughter and Leslie (1997) argue that these changes incentivize and reward certain aspects of academic careers while disincentivizing others, thereby interfering with the autonomy of universities and subjecting them to the interests of private corporations.

The criticisms surrounding TM give rise to disputed controversies. University administrative authorities face the massive challenge of dealing with relevant criticisms to demonstrate the value of universities for regional or local communities and build a reputation based on achieving good performance in global rankings. The organizational level is relevant, considering the context in which each university produces TM outputs. Foss and Gibson (2015) highlight the institutional architecture of 10 universities to assess how the local context influences the development of a productive entrepreneurial environment and the university's culture. From this perspective, each case shapes specific institutional contingencies. For example, in a study of Portuguese universities, Koryakina et al. (2015) show that financial and managerial pressures demand new professional skills to respond to challenges in delivering value in the knowledge economy. This challenge leads universities to develop new strategies to effectively promote TM advancement when there is an organizational strategic agreement (Stolze and Sailer, 2022).

These examples, which demonstrate the relevance of the local context, suggest that the capability of university authorities to respond to the contingencies of their territories contributes to producing TM outputs and is associated with the level of discretion they have to adapt to specific circumstances, establish partnerships, transfer knowledge, and diversify their sources of revenue to better deal with financial crises. This paper investigates the association between the level of financial decentralization in HEIs and their capabilities to produce TM outputs. How does the level of decentralization in universities, and its potential impact on their adaptability to local contingencies, affect the delivery of TM outputs? We aim to investigate this issue by employing an exploratory and comparative study of two general contexts for public universities. The first context is the system of selected federal universities in Brazil. Specifically, to obtain a well-defined locus (Region 1), we considered the federal universities installed in the Southeast region (São Paulo, Rio de Janeiro, Minas Gerais, and Espírito Santo states). The second context refers to the public university systems in Texas State, USA. We assume that the legal and administrative conditions under which universities exist significantly affect their competence and capability to contribute to social, economic, and environmental challenges.

Comprehending this issue is relevant for policymakers and practitioners once it aggregates new elements to discuss Higher Education (HE) policy in diverse contexts. Public policy studies provide extensive material regarding centralized and decentralized arrangements. However, to compare TM outputs, it is necessary to consider some limitations. Most rankings focus on teaching and academic research, and few indicators reflect the TM of HEIs (Urdari et al., 2017). Additionally, there has yet to be a consensus on defining a TM outcome. Nevertheless, a previous investigation in Brazil, Russia, India, China, and South Africa indicated that the top-ranked universities oriented their strategies toward TM (David, 2019).

The original contribution of this study is to explore the association between selected TM indicators from current global rankings and the structure of HE policy under which HEIs operate. The design of policy systems and the outcomes produced by universities to achieve social legitimacy represent a significant part of the institutional context and provide guidelines for future public policies in this area. It also allows for analyzing the limitations of ranking data and possibilities to guide decision-making.

This study briefly reviews TM and its meanings in the USA and Latin America, discussing the association between HE systems and the management capacity to achieve high levels of TM outputs. The following section explains the methodological procedures for a comparative analysis of the two selected regions. In the results, we first describe the regions. Region 1 (Southeast, Brazil) represents a centralized model that has developed a vast system of federal institutions. Region 2 (Texas, US) is an example of a decentralized structure that holds six systems of public universities, each one with different arrangements of rules. After describing some historical trajectories of each region, we present an analytical discussion of the principal findings and some of their implications for future public policies and strategic management.

Third mission in the contexts of Brazil and the US

Since the 1990s, the TM (Third Mission) approach has exerted a profound influence on the interaction between research, innovation, and society in Higher Education Institutions (HEIs) (Brandt et al., 2018). A comprehensive review conducted by Compagnucci and Spigarelli (2020) highlights key characteristics of the TM approach, including the interdependence of TM with teaching and research, the importance of local embeddedness, challenges in measuring TM activities, the contextual significance of each region, and the necessity of engaging diverse actors in co-creation processes.

However, the idea of universities assuming a role beyond teaching and research has been the subject of debate even prior to the emergence of the TM approach. Two distinct trends have influenced this discussion in the construction of the TM in Brazil and the United States: the concept of ‘‘university extension’’ and the enactment of the ‘‘Bayh-Dole Act.’’

The notion of ‘‘extension’’ has been integral to Latin American universities since the early 1900s. In 1918, the Córdoba movement proposed programs to bridge the gap between universities and underprivileged communities, emphasizing the central role of universities in social responsibility (Cristofoletti and Serafim, 2020). In Brazil, community extension has been formally integrated into university tasks as a mission since the 1930s under Getulio Vargas (Batista and Kerbauy, 2018). The Brazilian Constitution (Art. 207) underscores the inseparability of teaching, research, and community extension (Brasil, 1988). Conversely, in the United States, the broad academic and political discussion on university-community engagement emerged only in the late 1990s as a response to criticisms of an ivory tower mentality (Chupp et al., 2021).

In the United States, the TM approach has been significantly shaped by intense debates surrounding the commercialization of research outcomes. These debates were primarily influenced by factors such as the Bayh-Dole Act in the 1980s, which granted property rights to universities and public research centers, and the pursuit of technology with significant revenue potential (Rogers et al., 2001).

Regarding terminology, Gimenez and Bonacelli (2021) consider that community extension and the TM share similar purposes. However, a relevant divergence exists between the TM and community extension or other approaches to ‘‘university-community engagement’’ applied in Brazil and the US. The difference is based on the views of social change in Latin American countries and economic support in the US. From the Latin American perspective, social change is constantly opposed to economic development. This difference also applies to distinct fields of knowledge. Brandt et al. (2018) observed that the humanities are more actively engaged in social initiatives, while the natural sciences tend to cooperate more decisively with industry. Indeed, whereas the humanities decisively inspired the community extension approach in Latin America, the TM literature debate usually revolves around science, engineering, business, and economics studies.

These divergent perspectives and knowledge sources give rise to distinct mindsets. The traditional Latin American view of a university's social mission is firmly rooted in the critical perspective known as the ‘‘radical humanistic’’ paradigm, which highlights the human-created nature of all realities and advocates for an emancipatory philosophy that empowers individuals to create and transform society (Burrell and Morgan, 2016). This vision emphasizes social transformation and endeavors to establish an egalitarian society through self-conscious creation and processes of social change. In contrast, the TM approach aligns more closely with the ‘‘functionalist paradigm’’ that Burrell and Morgan (2016) identified, which emphasizes entrepreneurship within regional development.

When applied to specific contexts, these perspectives reflect universities' diverse capabilities to deliver value to society. The subsequent section will explore various factors that influence the development of TM practices, with a particular focus on the degree of autonomy and decentralization.

Higher Education Institution systems and their levels of decentralization

Understanding the tension between centralized and decentralized models is crucial for comprehending the current challenges in HE policies. Decentralization, as a premise of administrative reform, aims to transfer decision-making power to lower levels, enhancing efficiency and quality in decision processes (Smoke, 2015). However, in many developing countries, the classical argument for decentralized government must be revised (Wilson, 2005; Cendales et al., 2022). To address this issue, Lorz and Willmann (2005) consider the association between economic efficiency and political influences to comprehend the decision process in drafting public policies. To the authors, divergences in political vision and regional asymmetries produce a challenging environment.

The controversy between centralized and decentralized models reappeared after the COVID-19 pandemic. While central coordination was often recommended to tackle the situation, Yang (2020) mentions Contingency Theory to emphasize that decentralization suits governments responding quickly to challenges. However, despite the central coordination of national policies, inequities still need to be solved. In the case of Brazil, for example, since the Getulio Vargas government in the 1930s, the centralization of public policies still needs to resolve the issue of regional inequities (Tonelli et al., 2019).

While federalism assumes different conceptions worldwide, some of its central characteristics are decentralization and respect for the autonomy of member states (Nicolaïdis and Howse, 2001). This model aligns with the notion that each regional context requires different strategies and policies. In the context of HEIs, the federal government in the USA does not directly oversee a general system. For example, in Texas, there are six different public HE systems, each subject to a particular set of rules. This model illustrates a possible approach to developing heterogeneous policies considering historical episodes shaping diverse realities. This process considers local circumstances, the institutional architecture that may be more or less favorable to entrepreneurship (Foss and Gibson, 2015), and the sociomaterial artifacts available in each reality (Hess, 1995).

Scientists and policymakers widely believe universities must engage with local and regional development. Policy guidelines produced by international forums such as the OECD have a crucial impact on university contribution guidelines to local development (Kergroach et al., 2018; Parker and Lundgren, 2022; Pruvot and Estermann, 2017). Additionally, regional diversity demands that universities can adapt management strategies to the needs and opportunities that arise in specific contexts. However, in contexts with stricter rules where HE policy is centrally coordinated, and the system is large and diverse, the ability of an individual institution to adapt to local contingencies is limited (Koryakina et al., 2015). This situation poses a challenge for universities in responding to emerging opportunities. Although universities are increasingly expected to adopt more entrepreneurial behavior, institutionalizing technology transfer practices may be limited if not supported by appropriate rules (Koryakina et al., 2015).

Ladner and Keuffer (2021) propose a model to evaluate levels of decentralization in subnational governments, which is relevant to publicly funded universities that have had to develop technology transfer strategies to diversify their revenue due to the financial impacts of administrative reforms in the 1990s. Two variables from Ladner and Keuffer's (2021) model are particularly useful for investigating the degree of financial autonomy assigned to universities within the HE system: fiscal autonomy and financial self-reliance. Fiscal autonomy refers to the extent to which universities can charge for their services, while financial self-reliance indicates the proportion of universities' revenue derived from their sources.

While decentralized management can improve the efficiency and quality of technology transfer activities by enabling closer connections with local actors, many challenges remain to overcome. One of these challenges revolves around the shared meaning of technology transfer. For instance, technology transfer is not solely about commercializing contracts but engaging universities with their ecosystems in relational connections (Knudsen et al., 2021). This relational aspect of technology transfer necessitates a predisposition to employ collaborative governance mechanisms with non-academic partners at the local and regional levels (Cosenz, 2022). However, measuring the outputs of technology transfer poses a dilemma.

Methodology

To explore the structure of public HEIs and their capacity to deliver TM outputs, especially to the local communities where they are installed, we have chosen two case study regions: the federal universities established in Southeast Brazil¹ and the state universities of Texas, US. Table 1 presents the universities investigated.

Table 1.

Universities present in the global rankings elected.

Scope 1 – Federal universities installed in southeast of Brazil – Those present in the rankings	Scope 2 – State universities of Texas – USA – Those present in the rankings
Federal University of Juiz de Fora	Texas A&M University United States
Federal University of Lavras	University of Houston
Federal University of Minas Gerais	University of North Texas United States
Federal University of Uberlândia	Texas Tech University United States
Federal University of São Paulo	University of Texas at Austin United States
Federal University of São Carlos	University of Texas, Arlington United States
Federal University of Rio de Janeiro	University of Texas, Dallas United States
Federal Fluminense University	University of Texas, San Antonio United States
Rural Federal University of Rio de Janeiro	University of Texas, El Paso United States
Federal University of Espírito Santo	Texas State University United States
Federal University of Viçosa

Beyond the convenience (available data and access), the criteria used to select the regions was the distinctiveness of the governance models of HE in both places. Only the universities present in the rankings consulted were selected. The two regions were considered two independent cases. The objective is to compare (i) the level of financial decentralization that the universities have and (ii) the TM outputs produced by the universities in each context. According to Bartlett and Vavrus (2017), comparative case studies diverge from regular case studies. Traditionally, a case study considers “context as a container” or a place-based element. In contrast, the comparative study of cases has a broad process orientation (Bartlett and Vavrus, 2017), which is more pertinent to capturing institutional and path-dependent events. The following stages explain the systematization of the proceedings.

Stage one: Comparing the level of financial decentralization

To compare the level of decentralization of universities in both regions, we consulted the study by Ladner and Keuffer (2021). We selected two variables (Table 2) to express part of the composite factor that expresses the universities’ financial decentralization level.

Table 2.

Variables investigated.

Variable	Description	References for analysis
Fiscal autonomy (FA)^a	The extent to which universities can independently charge their students for services	From very limited (when there are legal impositions that limit universities authorities to charge students) to fully capable (when university authorities have legal capacity to charge students)
Financial self-reliance (FSR)	The proportion of university revenues derive from own/local sources (charges, fees)	From less than 10% (strong dependency on public resources) to more than 50% (high level of self-reliance)

^aWe substituted the term “Fiscal” (Ladner and Keuffer, 2021) for the term “Financial” to better represent the context of universities.

The criteria to select both variables are (i) the possibility of accessing objective data for each university and (ii) the high relevance of budget control to explain financial decentralization. Additionally, these elements were captured in the model by Pruvot and Estermann (2017), where they discuss financial autonomy in European universities.

To illustrate the differences between the two regions, we used textual research, which is appropriate in for an exploratory stage of research, when it is possible to access preexisting knowledge about the issue (Maraza-Quispe et al., 2020). The textual corpus comprises legal papers, finance reports, public statements, and similar material available on websites.

Stage 2: Exploring existing third mission indicators in global rankings

Multiple global rankings exist, but no specialized ranking exists to measure TM outputs. Additionally, Lee et al. (2020) advise that focusing on the global impact of rankings could negatively influence the strategies of local commitment. Thus, the use of existing databases to measure the TM must consider these limitations (Landinez et al., 2019). To reduce the bias, we selected two global rankings that, according to Landinez et al. (2019), are those that broadly reflect the TM (Table 3). They are U-Multirank (2022) and QS Employability (2023).

Table 3.

Rankings and third mission indicators.

Ranking	Third mission indicators
QS graduate Employability rankings (2023)	Employer reputation
Scores attribution conform performance	Graduate employment rate
	Partnerships with Employers per Faculty
	Alumni outcomes
U-Multirank (2022)	Co-publications with industrial partners
Scores for each indicator	Income from private sources
A/5 (Very good)	Patents awarded (absolute numbers)
B/4 (good)	Patents awarded (size-normalized)
C/3 (average)	Industry co-patents
D/2 (Bellow average)	Spin-offs
E/1 (Weak)	Publications cited in patents
	Income from continuous professional development
	Graduate companies
	BA graduates working in region
	MA graduates working in region
	Student internships in the region
	Regional joint publications
	Income from regional sources
	Regional Publication with industrial partners

Stage 3: Comparing decentralization regimes with third mission outputs

After assembling the data from (i) the qualitative evaluation of financial decentralization of the two regions in the investigation and (ii) the performance of the universities' TM indicators in the two rankings, we discussed the implications of the results for the future of public HEIs. The focus is on possible guidelines to permit universities to deliver value in terms of contribution to their local socioeconomic ecosystems.

Results

This section summarizes and discusses the main findings of this work. First, we present the financial decentralization analysis results, followed by the selected rankings' TM outputs.

Financial autonomy and financial self-Reliance

Region 1 – Southeast Brazilian Federal Universities

According to the census of HE (INEP, 2020), there are 2457 HEIs in Brazil. A total of 12.4% of these institutions are public: 4.8% are federal; 2.3% are municipal; and 5.3% are estate institutions. Regarding educational policy, Brazil developed a vast system of federal institutions distributed across technological education centers and universities. All of them are linked to the Education Ministry. Considering only universities, the federal system holds 69 HEIs with approximately 1.1 million students registered. These institutions are subordinate to the Secretary of High Education, which creates the general policies. All undergraduate and graduate students are tuition-free, and the federal state controls the budgets for the federal universities. Although universities rely on academic autonomy, they all have to execute a budget determined by the government.

Regarding the work regime for public staff and professors, there is only one career system and one national law applicable to the whole system. When the federal legislation approved a law in 2015 to limit public expenditure, the discretionary budget was diminishing yearly, and the system suffered. Additionally, several cultural and legal restrictions inhibit universities from using their knowledge and structure to provide services to citizens and industries. While the system aims to promote equity, the lack of openness to local choices restricts the wider flourishing of entrepreneurial universities.

The sample of universities (Table 4) represents the most representative federal universities of the southeast region. Considering financial autonomy (FA) – the extent to which universities can independently charge their students for services – it is relevant to consider some limitations. The Brazilian Constitution declares that the students' access to public teaching must be free of tuition. The Constitution also declares that universities have didactic, scientific, administrative, and financial management autonomy (Brasil, 1988). From a notable observation of both statements, it is possible to perceive a relevant contradiction. A high level of autonomy is a postulation that would ensure the capacity of university authorities to impose registration and tuition fees (Pruvot and Estermann, 2017). Nevertheless, the Supreme Court applied an interpretation that guarantees students free access to education and the unconstitutionality of any fees. Under these terms, university authorities cannot charge their students for primary services. Even considering possible exceptions, secondary services usually receive subsidies from the central government.

Table 4.

Data from the 2021 budget of Brazilian federal universities selected – Scope 1.

Higher education institutions	Local revenue (R$)	Total budget preview (R$)	Total revenue updated (with government cuts) (R$)	Local resources/total revenue
Federal University of Juiz de Fora	84.080.726,74	1.019.985.807	903.586.348,79	9,305%
Federal University of Lavras	4.490.917,01	410.838.761	366.538.985,60	1,225%
Federal University of Minas Gerais	22.182.562,25	2.434.744.293	2.217.295.424,96	10%
Federal University of Uberlândia	4.632.766,60	1.450.543.203	1.303.430.995,76	0,355%
Federal University of São Paulo	14.941.307,85	1.480.220.202	1.291.128.227,48	1,157%
Federal University of São Carlos	3.812.438,81	681.964.112	622.875.260,59	0,612%
Federal University of Rio de Janeiro	47.561.846,24	3.990.323.068	3.546.891.722,10	1,341%
Federal Fluminense University	19.708.190,66	2.347.015.649	2.067.152.369,40	0,953%
Rural Federal University of Rio de Janeiro	1.906.755,25	710.437.680	607.202.819,69	0,314%
Federal University of Espírito Santo	18.320.331,83	1.103.977.619	979.272.371,56	1,871%
Federal University of Viçosa	4.595.963,47	965.415.065	857.568.975,83	0,536%
TOTALS	226.233.806,71	16.595.465.459	14.762.943.501,76
Local revenue: Contracts of services provision, reimbursements, patrimonial income, other income
Total revenue includes federal transferences

Source: Transparency Portal of the Brazilian Government (Brazilian Federal Government, 2022).

In light of the recommendations of international agencies, administrative and financial autonomy demands a diversification of resources for greater efficiency. Despite this, the federal system of universities in Brazil did not develop financial autonomy once there were no conditions that ensured the exercise of decentralized management. The system promotes a standardized procedure that submits all the universities to the same rules, preventing each university from developing diversified solutions. With this in mind, financial autonomy is minimal once the several legal restrictions that limit university authorities from charging students are taken into account.

The second indicator to evaluate decentralization is Financial Self-Reliance (FSR). FSR refers to the proportion that university revenues derive from their own/local sources. Compagnucci and Spigarelli (2020) connect third-mission outcomes and fund sources once they affirm that entrepreneurial universities find more resonance in the USA, where private funds and corporate contracts provide a substantial part of university income.

Table 4 presents the general landscape of funds sources in Brazil. The data include the income locally realized by each university and the proportionality of this local revenue in the total budget. It represents the local capacity to produce funds as a product of service provision, contracts with support foundations, and other contracts with industry and social organizations. In contrast, these contracts do not include tuition fees or additional payments made to assure the permanence of the students in their undergraduate and graduate courses.

It is necessary to consider that the variations in FSR rates do not represent differences in budget control. In other words, the universities that perform better have the same treatment from the central administration as those that perform worst. To illustrate, in 2021, the Federal University of Juiz de Fora (UFJF) accomplished better results in this indicator once it produced 9,3% of the total budget, a rate much higher than the average. Even as the best performer, the UFJF does not have any privileges in distributing resources from the central government. Nevertheless, considering the rules that all the federal universities are subject to, the UFJF has to send all the revenue produced locally to the unified national public fund. Then, the central government redistributes the resources to all the systems according to the general fiscal guidelines of the federal budget.

Moreover, some situations impose a high level of vulnerability on the system. The first threat is due to Constitutional Amendment 95, approved in 2016, which limits the growth of primary expenses for 20 years. Even considering an optimistic scenario of GNP growth, constitutional rule will progressively and negatively affect the capacity of universities to offer quality services free of payment (De Oliveira and Corrêa, 2021). Second, the centralization of the budget and the sources of revenue submit the universities to a high level of uncertainty during state fiscal crises. For instance, the COVID-19 pandemic forced the state to incorporate new expenses to supply public health and social assistance, which motivated cuts to HE. Table 4 shows the total budget approved for 2021 and the way the total amount was distributed. The data indicate that the cut amount was nationwide at approximately 12%. Notably, this philosophy for budget cuts does not consider the significant differences in the circumstances for each university. Using the same example, even though UFJF was the best performer in producing local revenues, it received the same treatment as the worst performers.

In light of this general description, it is possible to affirm that the federal system of HEIs discourages the cocreation of local solutions to budgeting difficulties once there are no substantial institutional mechanisms that incentivize entrepreneurial behavior. Additionally, there are significant restrictions on the universities' exercise of their financial autonomy as the part of the discretionary resources that the university authorities can use is diminishing yearly due to constitutional amendment 95.

Region 2 - US Texas State University Systems

Federative regimes are premised on greater autonomy among subnational states (Tonelli et al., 2019). The United States represents the classical model of a federative state. This historical context has influenced the current circumstances in which universities and governments construct their HE systems and policies. From this point of view, the transition from a research university to an entrepreneurial university started in the USA. Early examples, such as the Massachusetts Institute of Technology (MIT), demonstrate how it was possible (Compagnucci and Spigarelli, 2020). The second transition marked the beginning of entrepreneurial activities as a relevant issue. This movement evoked controversies around distinct perceptions of university autonomy, impacted public policies, and affected university strategies (Etzkowitz, 2000). For instance, the Bayh-Dole Act represented an influential episode that encouraged US universities to engage in collaborative processes with industries (Nelles and Vorley, 2010).

Texas is a notable example of the HE organizational structure in the USA. Data from 2020 show that there were 667,072 students enrolled in public HEIs. In 2035, public universities will enroll approximately 800,000 students (THECB, 2021a). The state holds six systems of public universities: Texas State, University of North Texas, Texas A&M, University of Texas, University of Houston, and Texas Tech. These systems are subdivided into 36 academic institutions. Each one has different arrangements of rules, which define, for example, the level of participation in state funds. The current rules for each institution are firmly based on its circumstances as constructed over several decades.

Table 5 presents the general landscape of revenue sources. Regarding financial autonomy (FA), the extent to which universities can independently charge their students for services, the systems of public universities in Texas reproduce the usual situation for most US public universities. Tuition and fees represent 34,66% of the universities' funds. This situation illustrates that even with plenty of freedom to define charges for students, this source of income has a limit once it supports just a part of the total budget.

Table 5.

Data from the 2021 budget of Texan public universities selected.

Universities	Constitutional funds	State appropriations	Federal revenue	Local Government Grants	Tuition and fees	Institutional funds revenue	Total revenue	Local resources/Total revenue
Texas A&M University	201.614.294	449.121.506	272.642.791	-	679.630.868	728.145.432	2.129.540.597	66%
University of Houston (A + H)	54.514.004	249.063.522	263.368.751	11.634.678	400.572.093	412.544.878	1.337.183.922	61%
University of North Texas United States	37.346.563	166.646.513	165.506.817	587.381	363.524.651	110.694.849	806.960.211	59%
Texas Tech University United States	49.874.746	213.747.640	126.847.258	897.267	357.294.838	286.444.692	985.231.695	65%
University of Texas at Austin (A + H)	392.376.810	387.382.636	599.352.881	3.356.329	521.364.736	1.332.793.968	2.844.250.550	65%
University of Texas, Arlington United States	-	160.771.184	176.364.560	1.090.181	348.479.934	119.292.140	805.997.999	58%
University of Texas, Dallas United States	-	129.433.047	143.175.656	249.002	299.924.258	133.983.892	706.765.855	61%
University of Texas, San Antonio United States	-	162.176.413	200.914.830	3.165.406	251.699.436	158.923.884	776.879.969	53%
University of Texas, El Paso United States	-	133.335.593	206.524.165	770.814	148.988.894	55.407.179	545.026.645	38%
Texas State University United States	37.606.478	169.236.332	142.660.412	740.389	285.682.007	120.040.844	718.359.984	56%
Total or average	773.332.895	2.220.914.386	2.297.358.121	22.491.447	3.657.161.715	3.458.271.758	11.656.197.427	58,2%
A + H = academic + health		State grants and contracts – Restricted
		State grants and contracts – Restricted	Federal grants and contracts - Restricted		Tuition - Gross - AFR presentation	Endowment and interest income
		Available University Fund Excellence (see FN8)				Private gifts and grants – Restricted
						Sales and services
						Other income

Source: Texas Higher Education Coordinating Board (THECB, 2021b).

In addition, it is relevant to highlight that in three universities, most resources come from institutional funds, exceeding tuition and fees. This is the case for Texas A&M, the University of Houston, and, notably, the University of Texas at Austin. UT-Austin makes 46,85% of its revenues from endowments, fiscal interest, private gifts and grants, and other sources that constitute the institution’s revenue (Table 5). The capacity to generate financial resources from local competencies indicates financial self-reliance (FSR). Data show that the average percentage of university funds coming from local sources is 58.2%. This result represents a high level of self-reliance.

UT-Austin highlights the best performance in financial indicators (FA and FSA). The university's performance is intrinsically embedded in its history and path-dependent episodes. Austin is among the most attractive innovation ecosystems in the US. Gibson and Oden (2019) explain that this transformation is attached to historical milestones and changes in contingencies. Endogenous development was possible because of the evolution of local industry linked to academic research, the increase in innovative startups, the attractiveness of new stakeholders, and the establishment of durable relations between the actors.

Gibson and Oden (2019) identify some episodes that created the current circumstances. Some examples are the designation of Austin as the capital of Texas in 1881, the establishment of a permanent university fund in 1876, the donation of 1 million acres in western Texas for supporting the fund, and the discovery of oil in this land. The expanding oil production “elevated UT – Austin to have one of the largest university endowments in the nation.” This situation was improbable in the first decades of the 20th century, when the modest growth was driven by governmental activity (Gibson and Oden, 2019, p. 952).

From this example, it is possible to affirm that university systems in Texas permitted the assemblage of regional sociomaterial elements to create new circumstances and resolve financial difficulties. The example of UT-Austin also shows that the government could not entirely plan the trajectory to independent development, which often results from unexpected conditions. That does not mean that planning is irrelevant, but it enforces how positive it is to create a system that safeguards local competencies and capabilities to provide solutions.

Third mission indicators in global rankings

This part puts both regions into comparison and analyzes them in light of elected ranking indicators, which reflect the third mission. Tables 6 and 7 present the general landscape of the data.

Table 6.

Selected indicators and Universities’ performance of U-Multirank.

Indicators =>		Number of Students Source: QS – Top Univer-sities	Co-publica-tions with industrial partners		Patents awar-ded (abso-lute num-bers)		Patents awar-ded (size-norma-lized)		Indus-try co-patents		Publica-tions cited in patents		Regional joint publications		Income from regio-nal sources		Regional publica-tion with indus-trial par-tners
ScopeSoutheast Brazilian federal universities	Federal University of Juiz de Fora	16297	D	2	E	1	E	1	-	-	D	2	D	2	-	-	A	5
	Federal University of Lavras	14468	C	3	E	1	E	1	-	-	D	2	D	2	-	-	C	3
	Federal University of Minas Gerais	49052	D	2	D	2	D	2	-	-	D	2	C	2	-	-	C	3
	Federal University of Uberlândia	25761	D	2	D	2	D	2	-	-	D	2	D	2	-	-	D	2
	Federal University of São Paulo	14415	D	2	D	2	D	2	-	-	D	2	A	5	-	-	A	5
	Federal University of São Carlos	16629	D	2	D	2	D	2	-	-	D	2	B	4	-	-	C	3
	Federal University of Rio de Janeiro	49310	C	3	C	3	D	2	A	5	D	2	A	5	D	2	A	5
	Federal Fluminense University	70867	D	2	E	1	E	1	-	-	D	2	A	5	-	-	A	5
	Rural Federal University of Rio de Janeiro	13128	D	2	E	1	E	1	-	-	E	1	B	2	-	-	D	2
	Federal University of Espírito Santo	22932	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
	Federal University of Viçosa	17595	C	3	E	1	E	1	-	-	D	2	D	2	-	-	C	3
	Total/Average	310.454		2,3		1,6		1,5		5		1,9		3,1		2		3,6
Texan/Usa Universities	Texas A&M University United States	64752	A	5	A	5	A	5	B	4	A	5	D	2	-	-	D	2
	University of Houston	38027	A	5	A	5	A	5	D	2	A	5	C	3	-	-	B	4
	University of North Texas United States	33651	B	2	A	5	A	5	C	3	A	5	D	2	-	-	D	2
	Texas Tech University United States	35583	C	3	A	5	A	5	C	3	A	5	D	2	-	-	D	2
	University of Texas at Austin United States	48128	A	5	E	1	E	1	-	-	A	5	D	2	-	-	C	3
	University of Texas, Arlington United States	60000	A	5	E	1	E	1	-	-	A	5	C	3	-	-	B	4
	University of Texas, Dallas United States	27265	A	5	E	1	E	1	-	-	A	5	C	3	-	-	B	4
	University of Texas, San Antonio United States	28058	A	5	E	1	E	1	-	-	A	5	D	2	-	-	D	2
	University of Texas, El Paso United States	19044	B	2	E	1	E	1	-	-	A	5	D	2	-	-	E	1
	Texas State University United States	38500	C	3	A	5	A	5	C	3-	D	4	D	2	-	-	C	3
	Total/Average	393.008		4		3		3		3		5		2				3

Source: QS Top Universities (number of students) and U-Multirank (indicators).

Table 7.

Selected indicators of QS - Graduate Employability Ranking.

QS - Graduate employability ranking - www.topuniversities.com/- last update - 2022
	Indicators =>	Employer reputation	Alumni outcomes	Partnerships with employers	Graduate employment rate	Employer-student connections
Scope 1 Brazilian Universities	Federal University of Minas Gerais	-	51	-	-	-
	Federal University of Rio de Janeiro	-	72,7	-	-	-
	Average (southeast Brazil)	-	61,85	-	-	-
Scope 2 Texan Universities	Texas A&M University United States	53,3	45,1	73,8	-	51,3
	University of Houston	-	33,9	-	-	-
	University of Texas at Austin United States	80,6	74,7	74,5	68,2	-
	Average (Texas)	66,95	51,23	74,15	68,2	51,30

Source: QS Top Universities.

According to data from QS Top Universities (2023), the number of students registered in region 1 is 310.494, whereas in region 2, the number is 393.008. Table 6 presents the U-Multirank (2022) results. We applied a correspondence between the original scores with a numeric indicator (from better to worse performance: A=5, B=4, C=3, D=2, E=1). U-Multirank did not present the following indicators of TM outputs:

• Spinoffs

• Income from continuous professional development

• Graduate companies

• BA graduates working in the region

• MA graduates working in the region

• Student internships in the region

We excluded “income from private sources” because we discussed this item in the last part of this study. Eight other indicators from U-Multirank are shown in Table 6.

Table 7 presents the results of QS – Graduate Employability Ranking. The scores range from 0 to 100, and the best performer in each indicator is that which received the maximum score. The limitation of this ranking is the lack of several universities that are part of our sample. Although most of them are included in the general QS World University Ranking, only five of the 21 universities in our sample are included in the QS - Graduate Employability Ranking. Despite this missing information, it is still possible to extract some findings from the data.

Evidence from TM outcome indicators shows that region two performs significantly better than region 1 (on average) in the following respects

• Co-publications with industrial partners

• Patents awarded (absolute numbers)

• Patents awarded (size-normalized)

• Publications cited in patents

• Regional joint publications

• Income from regional sources

Three universities from region two also arise in Employer Reputation and Partnerships with Employers, two in Graduate Employment Rate and Employer-Student connections. Region 1 did not appear in these indicators.

Region 1 presented modestly better results in the categories regional publications with industrial partners and alumni outputs. Regarding industry co-patents, the best performer was the Federal University of Rio de Janeiro. However, it was the only university with this indicator in region 1, whereas four Texan universities had this indicator.

Implications

The results may have implications for understanding aspects addressing HE policies, their structures of governance, and their potential to produce TM outputs. The structural contrasts between the two regions were particularly interesting for enlightening organizational strategies and general policies that can stimulate university capabilities to face local challenges.

The first implication is about the limitations of centralized coordination. In region 1, centralized policies indicate the same conditions should be applied in terms of rules from staff career tracks to fund management. Additionally, this unified system of rules promises equal conditions and results for teaching and research, although different local realities make this promise unrealistic. In addition to difficulties in achieving the required results for these two missions, the TM demands local commitment and administrative capability to adapt to regional demands. The evolution of a local commitment often depends on organic and nonprogrammed solutions. This phenomenon was observed by Foss and Gibson (2015) when they affirmed that university entrepreneurship activities emanate without much organized regulative effort. Our study demonstrates that the healthier results came from region 2. This region better assimilated the local contingencies. The idea behind this observation is that each path-dependent trajectory is shaped by the sociomaterial conditions. Despite the necessary bureaucratic organization of the system to achieve public value, it is coherent with the present study to affirm that the best policies are those that better permit synergy with local structures.

The contrast between centralized and decentralized systems leads to a deeper discussion about university autonomy. Pruvot and Estermann (2017) provide four dimensions of university autonomy: organizational, financial, staffing, and academic. The authors revealed that there are different degrees in each dimension. Our study focused on just part of financial autonomy. It is relevant to observe that in region 1, Article 207 of the Constitution of Brazil ensures that all universities have didactic-scientific, administrative, and financial autonomy (Brasil, 1988). However, this general statement contrasts with highly centralized realities regarding their financial sources. Universities in this region cope with a strongly rigid structure limiting their use of resources, mainly because of legal limits. Even the universities producing local revenue must send this resource to a unified center. The region’s best university producer of local revenue suffered similar budget cuts as other universities, as we demonstrated. This situation discourages entrepreneurial actors and embarrasses the institutionalization of an entrepreneurial university. A proposed amendment to the Constitution submitted in 2019 (PEC 24/2019) seeks to correct this situation. In short, this proposal will allow universities to use resources from their own revenues with greater freedom if approved. However, the proposal has yet to advance.

In region 2 it is possible to perceive that some colleges have legitimate spaces for entrepreneurial action in that university. McCombs School of Business of UT highlights several centers and initiatives focused on collaborative partnerships, business leadership, venture labs, and innovation incentives and processes. Contrasting this case with the Brazilian region, the tight scope for entrepreneurial action and the lack of perceived advantages to entrepreneurial action limits the potential for a more active relationship with local economic, governmental, and social actors. Even considering these limitations, a prominent success story in Brazil comes from the Engineering Institute Alberto Luiz Coimbra (COPPE) of the Federal University of Rio de Janeiro. This Institute represents the more extensive complex of engineering in Latin America and pursues several contracts with industry, governments, and nongovernmental organizations. However, all of these contracts are administered by private foundations. Even though different foundations are present in the federal university system, different legal interpretations of the law and path-dependent realities represent severe limitations for using their potential. A relevant portion of university administrators fears improving the support from foundations and being held responsible for not observing some legal rule.

In light of the leadership role of university authorities, another implication is the connection between entrepreneurial universities and the availability of high levels of management to assume the risk of TM activities. It is easier to focus on teaching and research, following the international evaluation pattern for these activities. However, the TM depends on going beyond the modus operandi generally linked to teaching and research. This means that a high level of financial decentralization will not increase entrepreneurial action unless there is intensive support and incentives from university leadership. In the cases of UC, Berkeley and Stanford University, Leih & Teece (2016) demonstrate that leadership is a crucial factor that influences the university’s competitive fitness and long-term survival.

The last implication refers to the meaning that the Third Mission assumes in different contexts. In Texas, some colleges assimilated the concept. The performance of universities in most indicators demonstrates that they have developed long-term initiatives for the TM. Moreover, in Brazil, there is a misunderstanding about the place that the TM has to fill. Some authors, such as Gimenez and Bonacelli (2021), believe that the Latin American tradition of university community extension shares the same meaning as the TM. In light of the discussion in this work, we must be careful in putting both concepts within the same mindset. These difficulties in recognizing the TM's necessity, applicability, and indispensability in Brazilian universities still demand a broader debate, which could inform future policies addressing the question.

Conclusion

We have shed light on the association between universities' level of financial decentralization and their capabilities to produce TM outputs. To do that, first we compared (i) the level of financial decentralization of two regions with universities (Brazil and Texas) and (ii) the TM outputs produced by the universities in each region.

The present study contributes to several areas, especially the public policies of HE and the strategies for HEIs. The study also offers secondary contributions, such as the problematization of university autonomy and the cocreation of the capabilities of entrepreneurial universities. The original contributions of this research align with various studies regarding HE policy and international rankings (David, 2019; Urdari et al., 2017); university engagement with the region and TM outputs (Sánchez-Barrioluengo and Benneworth, 2019); university autonomy (Ladner and Keuffer, 2021; Muizniece, 2021; Pruvot and Estermann, 2017); and entrepreneurial universities under diverse theoretical lenses (Foss and Gibson, 2015; Guerrero and Pugh, 2022).

The available evidence seems to suggest a positive association between the level of financial decentralization and the capability of the structure of HE to deliver TM outputs. Region 1 exposes a situation where the university authorities have tight discretion over financial autonomy. The low level of financial decentralization replicates modest results in TM outputs. In contrast, region two presented a higher level of financial decentralization. Under this governance structure, where the universities have more space to exercise their autonomy, the TM outputs measured by the selected indicators were more prominent. These findings reinforce the general belief that the governance arrangements that permit exploring synergies within local business ecosystems are more appropriate for ensuring organizational changes in the direction of entrepreneurial action.

More comparative research based on different sample sizes is desirable to judge whether decentralized arrangements work in contexts where clientelism is prominent to address a question brought by Wilson (2005). Despite the importance of aggregate research to compare broader regions, some illustrations of individual circumstances and path-dependent episodes enforce the relevance of investigating particular contexts. Future studies should consider particular cases to inform scholars and policy-makers about critical factors that imply practical results. Further qualitative work could provide deeper explanations about how specific trajectories determine the success or failure in delivering TM value to society. In this way, many theoretical approaches can contribute to understanding how institutional change can provide collaborative arrangements for local development.

It is relevant to consider the principal limitation of the present study. We already discussed the difficulties of using international rankings to access TM outputs. Beyond this difficulty, we faced a lack of complete information for each indicator and university consulted in the ranking’s platforms. There were no data on several indicators previously planned for inclusion in the methodology. Although this difficulty did not impede the research, the results could have been more detailed to better compare the two regions.

Even considering this difficulty, we believe that other studies can consider the use of TM outcome indicators once the partial results here are seen to confirm previous arguments this field that the more autonomy the HEI has, the more likely it is to be responsive to local challenges. In addition, this responsivity positively impacts innovation, entrepreneurial action, business, and societal ecosystems.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the CNPq - Conselho Nacional de Desenvolvimento Científico e Tecnológico (200067/2022-2).

ORCID iD

Dany Flavio Tonelli

Note

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