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Colleges and universities have the potential to make a significant contribution to societal development (Owens, 2017). They educate people and produce different kinds of professionals—such as marketers, business executives, entrepreneurs, researchers, technologists, athletes, educators, doctors, engineers, scientists, and astronauts—to develop the economy of a country and promote diversity and social well-being. Furthermore, basic and applied research works are conducted in colleges and universities, especially in research-oriented universities, that can expand the frontier of human knowledge and advance the application of scientific knowledge (Chankseliani et al., 2021; Jasimuddin et al., 2019).
The Human Capital Theory argues that educational investments can boost future production (Holden & Biddle, 2017). Mincer (1984) examined the impact of human capital on economic growth and found that the rate of accumulation of human capital and innovation was related to the rate of output growth. Human capital is undoubtedly a critical component of economic growth (Diebolt & Hippe, 2022), and educational attainment has an impact on labor productivity. Higher education institutions are viewed as organizations that expand human capital and discover new knowledge and technologies (Chankseliani & McCowan, 2021). Thus, both developed and developing countries have focused on promoting the development of higher education in recent years. Many policies are introduced to continuously increase investment in higher education, including these examples:
Generally, the amount of expenditure as a percentage of gross domestic product (GDP) is used as an indicator of the effort made in practice by most national education financers. Although a significant amount of public funds has been invested in higher education in many countries, the relationship between investment and education is perplexing (Grubb & Allen, 2011). Many colleges and universities are publicly funded. These public institutions are under pressure to report performance enhancements to the funding agencies and the public. With the pressure from both inside and outside to build world-class universities and achieve good international rankings (Vidal & Ferreira, 2020), these educational institutions must compete not only for domestic educational resources but also for academic staff and students on a global scale (Chirikov, 2016; Ma & Zhao, 2018). In such a hyper-competitive environment with limited resources, the governments and the general public demand that educational institutions operate as efficiently as possible (Johnes et al., 2017; Moncayo–Martínez et al., 2020). Hence, demonstrating and improving the efficiency and effectiveness of running a higher education institution is extremely critical (Hanushek, 2020; Mammadov & Aypay, 2020; Patrinos & Psacharopoulos, 2020).