Why Are Private Universities Struggling to Sustain Their Competitive Performance?

Higher education is entering a period of profound change. Universities are no longer competing only through academic reputation, established programmes, or physical infrastructure. They must now respond simultaneously to demographic shifts, technological disruption, changing student expectations, labour-market demands, and increasingly complex regulatory environments.
These pressures are particularly significant for private universities. Unlike many publicly funded institutions, private universities frequently depend on tuition fees as a major source of operational income. Consequently, changes in student enrolment can directly affect their financial stability, capacity for innovation, and ability to sustain academic quality.
In Indonesia, this challenge is becoming increasingly visible. Many private universities operate in regions where numerous institutions compete for a limited pool of prospective students. At the same time, public universities continue to expand their programmes and admission pathways. Students and their families can also compare institutions more easily through digital platforms, accreditation information, university rankings, graduate outcomes, and social media.
As a result, the decision to choose a university is becoming more selective. Prospective students no longer evaluate an institution solely by its location or tuition fees. They increasingly consider programme relevance, learning flexibility, digital services, career opportunities, industry connections, international exposure, and the institution’s reputation.
This changing environment raises an important question: why do some universities perform better than others, even when they face similar external pressures?
A conventional explanation is that successful universities possess stronger internal resources. These may include competent academic staff, effective leadership, technological infrastructure, organisational culture, financial capacity, and established academic systems. From a resource-based perspective, such assets can become important foundations for institutional advantage.
However, possessing resources does not automatically produce superior performance.
A university may employ qualified lecturers but fail to translate their expertise into innovative programmes. It may invest in digital technology without integrating it into teaching, research, and administrative decision-making. It may also establish partnerships with external organisations without developing those relationships into productive collaboration.
The same principle applies to environmental change. Awareness of competition, regulation, technological development, or labour-market trends is valuable only when the university can convert that knowledge into an appropriate strategic response.
Therefore, the central challenge is not simply whether universities possess valuable resources or understand their external environment. The more important issue is whether they can mobilise those resources, respond entrepreneurially, formulate competitive strategies, and develop productive relationships with stakeholders.
Our research investigates this challenge within Muhammadiyah universities in Central Java and the Special Region of Yogyakarta, Indonesia. These institutions operate within a distinctive context. They carry an educational and social mission rooted in Muhammadiyah values, while simultaneously facing intense competition in the contemporary higher-education market.
The study examines six interconnected elements: the external environment, the internal environment, corporate entrepreneurship, competitive strategy, relational capital, and university performance. Rather than assuming that resources and environmental conditions influence performance automatically, we investigate the mechanisms through which those factors are transformed into institutional outcomes.
Competitive strategy represents one of these mechanisms. Universities must determine how they will distinguish themselves, serve their target students, develop relevant academic programmes, and respond to technological and market changes. A strategy becomes meaningful when it guides resource allocation and produces a recognisable institutional position.
Relational capital provides another important mechanism. Universities depend on relationships with students, alumni, industry, government, professional associations, communities, and other educational institutions. Trust-based relationships can support collaborative research, student internships, graduate employment, knowledge exchange, resource sharing, and institutional legitimacy.
Corporate entrepreneurship is equally important because universities must be capable of innovation, calculated risk-taking, proactive action, strategic renewal, and the creation of new academic or non-academic initiatives. In a disruptive environment, institutional stability should not mean organisational rigidity.
The emerging lesson is that competitive university performance cannot be explained by a single factor. It develops through the interaction of resources, environmental awareness, entrepreneurial behaviour, strategic choices, and stakeholder relationships.
This perspective shifts the discussion from “What does the university have?” to “What can the university do with what it has?”
For university leaders, this distinction is crucial. Sustainable performance requires more than increasing resources or reacting to short-term enrolment pressures. It requires the institutional capability to transform available resources and environmental knowledge into coherent strategies and valuable relationships.
In the next post, I will discuss the specific competitive challenges confronting Muhammadiyah universities in Indonesia and explain why this context provides an important setting for understanding university adaptation and performance.