Who Pays the Piper, Calls the Tune An Analysis of Funding Formula Designs for Universities of Applied Sciences: Insights from Finland and Poland

Abstract

Despite their growing economic, political, and societal importance, universities of applied sciences (UASs) in Europe remain under-researched compared to traditional universities. Consequently, more research is needed to address the diverse roles of UAS institutions in different national contexts. Existing comparative research highlights the challenges posed by constrained public funding and the need to diversify revenue structures, often focusing on the effects of performance-based funding mechanisms. However, cross-country analyses of the design of governmental funding for UASs remain scarce, which has left a research gap in understanding how national policies influence UASs and their core functions. This study addresses this gap by using principal–agency theory and systematically analyzing governmental funding models for UASs in Finland and Poland. The findings reveal key similarities and differences in financing and principal–agent relationships which reflect distinct national policy priorities. Finnish policies incentivize broader societal engagement and innovation, while Polish policies prioritize institutional stability. These differences have significant implications for the missions and activities of UASs in each country. By examining these contrasting approaches and highlighting challenges related to mission overstretch and a weaker institutional identity than traditional universities, this study contributes to the ongoing discussion of the role of UASs in Europe.