Abstract
In the debate surrounding various reforms in higher education systems, performance, along with how universities should be governed, have been main issues. We argue that the demand for shared governance, i.e., faculty participation in decision‐making vs. concentrated or top‐down decision‐ making, is driven by the characteristics of academic transactions. Especially in universities, shared governance prevents that the unilateral allocation of authority paves the way to the abuse of authority, which would depress incentives to undertake optimal idiosyncratic investments in human cognitive resources, or prevent cooperation in a context characterized by contractual incompleteness and transactions involving multiple specific investments and coessential resources. To empirically analyze our hypothesis, we collect original survey data of Italian universities in 2015. We find that shared decision‐making processes are correlated with better performance.
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