The Birth and Diffusion of Four Year Degree Granting For-Profit Colleges and Universities in the US, 1975-2012

Abstract

For-Profit Colleges and Universities (FPCUs) are one of the most controversial forms of post-secondary institutions in the United States and perhaps across the world. Today, 25 percent of all degree granting institutions in the country are identified as FPCUs. The purpose of this study is to offer a theory based, national level explanation for the birth and diffusion of FPCUs that emerged in the higher education industry since 1975. Two organizational founding theories were employed to understand the FPCU phenomena: (1) Neoinstitutionalism, and (2) population ecology theory. Using event-history data on FPCU foundings and environmental conditions of the founding locations from 1975-2012, I assessed the effect of ecological and institutional predictors on the odds of FPCU foundings. The results of this study suggest that urbanization as population growth and formation of economically integrated locations has the strongest effect on foundings, followed by prior foundings. The supply and the demand of human capital, lack of competition from incumbent public universities and the availability of regional accreditation for FPCUs were also predictive of foundings. The results of this study also suggest that differentiated demand for college education rising from urbanization supported the emergence of FPCUs. This trend has policy implications because it points to the need for capacity building in urban areas. This study is only a first step effort in understanding the emergence of FPCUs, therefore this study concludes with suggestions for future research on the evolution and survival rate of FPCUs