Sustainable Higher Education Policy: The Strategic Implication of Taiwan’s SPROUT Project and Fiscal Sustainability

Abstract

Worldwide educators have been devoting resources to quality education and achieving Sustainable Development Goals. Taiwan strategically implemented the Higher Education Sustained Progress and Rise of Universities in Taiwan (SPROUT) Project with an equity-oriented resource allocation. This study aims to investigate the effectiveness of SPROUT’s implementation by analyzing 2018 to 2023 data. In this study, we construct a Fiscal Sustainability Index and other Institutional Performance Index to assess institutions. The two-way fixed effects regression model is applied to investigate the causal relationship among FSI, institutional performance, and the implemented effect of the SPROUT Project. The results of this study showed that the SPROUT Project has not fully achieved all four core objectives, and regional disparities still persisted. In other words, the elite universities in northern Taiwan still receive the most SPROUT Project funding and outperform other universities in other regions. FSI is positively associated with publicness, social responsibility, and overall institutional performance. The results of this study show how higher education institutions can achieve partial sustainable development goals of Goal 2030 via fiscal sustainability and equitable resource allocation. Taiwan’s pivot toward an equity-funding paradigm and supplement with performance-based grants has attenuated the historical concentration of resources among elite universities. Quality education should be inclusive, equitable, and accessible in education and sustainable resources.

1. Introduction

In achieving Sustainable Development Goal (SDG) 4 & 10—Quality education and reduce inequality, worldwide educators have been devoting resources to these aims, and higher education is no exception. According to the 2025 report [1], one of the essential policy tasks is allocating resources toward access, learning, and equity [2]. Higher education institutions (HEIs) also face challenges such as demographic shifts, government budget cuts, and changes in international collaboration due to policy changes. For HEIs, sustaining financial stability while advancing academic excellence and collaborating with local communities requires sustainable financial mechanisms to adapt to dynamic environments [3,4]. Taiwan’s recent education policy, the Sustained Progress and Rise of Universities in Taiwan (SPROUT), aimed to achieve quality education while addressing issues of teaching quality, equity, regional balance, and other related global challenges.

HEIs and academics nowadays are no longer confined to the ivory tower but are also tackling the escalating challenges in society. Demographic changes such as declining birthrates or population migration out suggest the potential impacts on enrollment, faculty hiring, and resource allocation [5]. Such cases also demonstrated the importance of financial stability in sustaining the university’s mission in advancing academic excellence, quality of teaching and learning, and preparing students for the workforce. Facing decreasing government funding and a projected tuition deficit, the financial stability of HEIs is sustained by their fiscal sustainability.

The fiscal sustainability of HEIs has emerged as a critical focus in global policy debates, particularly amid escalating challenges such as economic volatility, demographic shifts, and competitive internationalization. Fiscal sustainability can be defined as the ability of HEIs to respond to emergencies, maintain financial stability, and promote research innovation facing unforeseen events [6,7,8]. Fiscal sustainability may address financial constraints or funding fluctuations among higher education institutions, as well as resource allocation. In other words, fiscal sustainability also refers to the capacity of the fiscal system and institutions to address emergencies or fiscal crises. As such, fiscal sustainability can be divided into systematic and institutional sustainability, and both indicate degrees of educational equity, fiscal stability, and sustainability.

Systematic sustainability focuses on how to allocate resources equitably. Did the resources reach the areas that the current funding intends to address or aggregate the equity gap? For example, did the current funding project remain within the elite or top-tier universities? The fiscal project intends to address the regional imbalance, which is widening the equity gaps. The 2023 data showed that the top five universities in Taiwan amount to 38% of the total fiscal budget [9]. Over-centralized funding on the top-five universities would lead to aggregation of the equity gap existing among universities, as well as regional balance, as 4 out of these five universities are in the northern regions. Institutional sustainability refers to the fiscal capacity of the universities and how they allocate funds for research, teaching, or service innovation. Can universities use funding to establish adaptive mechanisms, such as expanding non-government funding via industry collaboration as well as donations from alumni and other social entities? Fiscal sustainability at the institutional level includes, but is not limited to, financial survival, maintaining equity, access, and excellence in higher education.

Previous studies have evaluated university research, international rankings, and how that affect institutional strategies [10,11]; while existing studies on fiscal sustainability in higher education predominantly emphasize austerity measures or diversified revenues streams [12,13], missing the opportunity of institutional transformation. Institutional transformation can be prioritized by universities and institutions that utilize their regional resources to generate self-generated income [14]. This gap obscures understanding of how policy-designed funding mechanisms can simultaneously address systematic vulnerabilities and foster fiscal sustainability. The SPROUT Project is driven by—teaching innovation, the public function of higher education, institutional distinctiveness, and social responsibility [15], which is intended to transform the higher education institutions. This study examines the SPROUT Project by analyzing its funding allocation in terms of fiscal sustainability. It seeks to address the following research questions:

RQ1: Whether the SPROUT project can sustain its resource allocation in balancing the current regional differences?

RQ2: How do the universities perform after receiving the SPROUT project funding?

RQ3: How does fiscal sustainability affect overall institutional performance?

This study not only reveals structural disparities in resource allocation under the SPROUT Project but also offers critical insights for designing equity-driven and resilience-oriented funding frameworks in higher education systems outside Taiwan.

2. Literature Review

Fiscal sustainability in higher education refers to the ability of institutions to withstand financial pressures and maintain stability while continuing to provide quality education. The following literature review starts with challenges and opportunities of HEIs. It then discusses insights and strategies that may enhance fiscal sustainability of HEIs. Finally, it concludes with the theoretical framework of this study and hypothesis.

2.1. Challenges of HEIs and Opportunities to Enhancing Fiscal Sustainability

Decreasing state and federal fundings force institutions to seek alternative income sources to sustain quality education. In light of these conditions, diversified funding streams—encompassing strategic partnerships with industry, expansion of continuing education programs, and proactive engagement in philanthropy—are critical to distribute risk and reduce overreliance on tuition [16]. Awashreh’s case analysis also reveals that HEIs that established joint-research ventures and co-funded initiatives with private sector entities were able to offset budget shortfalls by up to 12% without sacrificing instructional quality. This shows HEIs ways to sustain themselves without increasing tuition and sacrificing instructional quality.

Relying on tuition is mostly equivalent to headcount-based funding models, which can leave institutions vulnerable to demographic shifts [17]. This study also indicated that universities incorporating graduate employability metrics into funding formulas had relatively more stable revenue. Stable funding and a high job placement rate of graduates also attract both domestic and international applicants. Such econometric modeling suggests that institutions exposed to a 20% cut in public financing did better when they had pre-established mechanisms to simulate funding shocks. The research findings of this current study suggest that aligning resource allocation with graduate outcomes and implementing sustainability initiatives can be a win-win solution to attract student enrollment as well as enhance fiscal sustainability.

Institutional fiscal sustainability can also be reinforced by prudent regulatory compliance and robust contingency planning [18]. During economic downturns, HEIs implemented financial models that projected fluctuations in both public and private revenue sources and were able to maintain operating margins within acceptable thresholds, even with a 15% decrease in donations. In other words, such financial models contribute to the fiscal sustainability and help academic missions. Fiscal sustainability in higher education comes from diversified funding strategies, data-driven budget planning, and institutional and systematic adaptability. In general, generating multiple funding revenue, rigorous financial modeling, reducing campus facility operation expenses, and implementing sustainability measures would reduce the long-term costs of HEIs. HEIs could also strategize what would be the best practices to sustain their high quality and achieve long-term stability, whether that is diversifying revenues, enhancing fiscal sustainability, or complying with financial regulations.

2.2. Key Strategies for Enhancing Fiscal Sustainability in HEIs

We have identified several strategies to enhance fiscal sustainability in HEIs. Diversified funding sources are crucial as HEIs can expand into both public and private funding sources, and such an approach helps mitigate risks associated with reliance on a single funding source [19]. For example, European universities are adopting performance-based funding models that allocate resources based on specific outcomes, such as graduation rates or research achievements, to encourage effective financial management and long-term sustainability [20]. Leadership plays a significant role in fostering fiscal sustainability through strategic planning and open communication, particularly during times of crisis [21]. These studies demonstrate the importance of effective strategic planning, diversifying funding sources, and open communication are important to enhance fiscal sustainability.

Strategies of fiscal sustainability encompass environmental, economic, social, and technological dimensions and they all contribute to overall efficiency and cost reduction. Many HEIs contend that escalating expenditures in areas such as faculty compensation, utilities, and infrastructure maintenance, while the growth of tuition revenue is limited by market competition and regulatory caps [22]. Identifying sustainability strategies—such as investing in climate-adaptive infrastructure and enhancing campus energy efficiency—that indirectly bolster economic performance by reducing long-term operating costs. In their study, an HEI reported a 9% reduction in annual utility expenses that retrofitted its facilities for improved energy conservation. The saved expenses were allowed to move to areas in teaching and learning, which was subsequently reallocated to research grants and scholarship programs.

2.3. SPROUT Project and Fiscal Sustainability

As institutions strategize ways to enhance fiscal sustainability, policies also shifted from their funding model to government control to government supervision [23]. Such efforts were reflected in Taiwan through policies such as the 2005 Top University Project, the 2006 Teaching Excellence Project, and the recent SPROUT Project. In 2017, the SPROUT Project was launched was implemented with a budget of NT$86.85 billion, approximately USD2.9 billion [24]. The SPROUT Project allocated its funding based on the basic funding and competitive funding which the first one dedicated to overall educational quality and equity, while the second one is dedicated to world-class universities and developing research centers [25]. The competitive funding tended to be distributed based on institutions’ enrollment, historical performance, and completion of predetermined project milestones, and was determined by elites or prestigious overseas scholars [26].

Unlike previous policies that allocate funding based on research and teaching excellence, SPROUT also gives funding based on both institutional performance after receiving the funding. This suggests that sustained progress means both historical performance as well as how institutions perform after receiving the SPROUT Project. In its efforts in allocating funding into different types of institutions also thrive other non-elite universities as these universities educate the majority of students in Taiwan. The rise of these universities also means the rise of these young students within these institutions.

This study examines the effectiveness of the SPROUT Project in HEIs and evaluates the results from 2018 to 2023, which contributes to the fiscal sustainability at both institutional and systemic levels. In the context of Taiwanese higher education, fiscal sustainability reflects institutions’ capacity to operate stably and fulfill their academic mission despite fluctuations in revenue. Traditionally, fiscal sustainability has been measured by decomposing total income into basic funding, competitive funding, and non-government revenue. This study analyzes basic funding and competitive funding of the SPROUT Project as shown below in Figure 1. The SPROUT funding is linked to four core policy goals—teaching innovation, publicness, university distinctiveness, and social responsibility, which jointly fit into two dimensions of fiscal sustainability: (1) resource stability means the extent to which an institution relies on SPROUT funding relative to non-government sources. (2) performance stability, the degree to which SPROUT Project resources generate measurable outputs aligned with its four policy goals.

Based on such policy goals and implementation, this study proposed the following hypotheses:

Hypothesis 1:

HEI type (public vs. private; general university vs. technical-vocational college) has a significant effect on the degree of SPROUT Project funding dependence.

Hypothesis 2:

The allocation of SPROUT Project funding generates different implemented effects in different universities.

Hypothesis 3:

Higher fiscal sustainability is positively associated with overall university performance, and more specifically positively associated with the fulfillment of publicness and social responsibility missions. The SPROUT performance indicators across four domains—teaching innovation, publicness, distinctiveness, and social responsibility—moderate the relationship between institutional characteristics and the received amount of competitive funding.

This study intends to explore the effect of the SPROUT Project in HEIs, its impact upon teaching innovation, university distinctiveness, social responsibility, and publicness of higher education and the relationship with fiscal sustainability.

3. Methodology

3.1. Data Collection

The data of this study encompass 2018 to 2023 HEIs in Taiwan receiving the SPROUT Project funding. The primary data were obtained from the Ministry of Education’s Higher Education Database and the University Affairs Open Data Platform. These official data sources provide institution-level records including university names, university codes, county and regional classifications, and key indicators relevant to the evaluation of the SPROUT’s implemented outcomes. Institutional characteristics such as university types (national vs. private), learning types (general vs. technological), student enrollment, and full-time faculty headcount were also collected for further analysis.

3.2. SPROUT Project and Fiscal Sustainability Index

In order to assess whether the funding criteria truly achieve the goals of the SPROUT Project, the fiscal sustainability index (FSI) was calculated. This index is to detect whether basic versus competitive funding allocation of the SPROUT Project might provide more privileges to elite institutions. Consequently, it is not possible to distinguish basic versus competitive SPROUT allocations in a manner that aligns with their original conceptual definitions. The formula for FSI for each institution is listed below:

$${FSI}_{i,t}={\displaystyle \frac{{Non\_Gov Revenue}_{i,t}}{{Non\_Gov Revenue}_{i,t}+{SPROUT Funding}_{i,t}}}$$

i in year t as the ratio of total SPROUT Project funding to the sum of SPROUT funding and all non-government revenues. ${SPROUT}_{i,t}$ denotes the total annual subsidy received from the SPROUT Project, including both baseline and performance-based components, by institution i in year t. ${NonGov}_{i,t}$ denotes the total annual non-government revenue reported by institution i in year t. Non-government revenue comprises industry–university collaboration income, donations, tuition fees beyond government appropriations, and any other self-generated funds. The public universities receive annual government educational appropriations while private universities do not, so the FSI of these two types cannot be compared on the same basis concerning fiscal resilience. Therefore, we consider institutions that received both types of SPROUT Project funding and other self-generated non-governmental revenues, as shown in

Table 1. Constructing the Fiscal Sustainability Index.

Dimension	Variables	Description	Normalization
SPROUT Funding	funding_billion	Share of SPROUT subsidy revenue	Min–max (0–1)
Non-Gov Revenue	n_gov	Tuition and miscellaneous fees revenue; continuing education and other instructional activities revenue; industry-university collaboration revenue; donations; Operating income; Financial and other sources of income	Min–max (0–1)
Composite	FSI	Average of the two normalized shares	Computed

.

To evaluate institutional development performance under the SPROUT Project, this study operationalizes four core policy objectives and which are measured and assessed by seven measurable indicators. Each indicator is drawn from publicly available institutional data and represents a policy-aligned proxy for performance in specific domains. These indicators are standardized through min–max normalization and aggregated into sub-index scores representing each policy objective. A summary of the SPROUT Project and its corresponding indicators is presented in

Table 2. SPROUT Policy Objectives and Associated Performance Indicators.

Policy Goal	Indicator	Proxy Indicator(s)	Variable Name
Teaching Innovation	Patent	University-held patents	patent
	Academic Research Funding	Research grant	Acad_uni
Publicness	Underrepresented students who receive financial aid	Number of underprivileged students receiving financial aid	Aid rate
	Library Resources	Total print and digital holdings in institutional libraries	library
Distinctiveness	Enrollment	Freshman enrollment rate	register_rate
	Internationalization	Number of international (cross-border) graduates	intnat_grad
Social Responsibility	Industry Collaboration	Revenue from university-industry partnerships	Coo_funding

.

These indicators are selected to serve as a proxy to analyze institutional performance, and data is retrieved from the Ministry of Education’s higher education open data platform. Patent refers to the number of formally approved patents in each university. Serving as a proxy for teaching innovation and knowledge production capacity. Academic research funding refers to the amount of research-related financial support that institutions receive, including both the SPROUT Project and external grants. This indicator is commonly used in allocating higher education funding; thus, it might also capture how innovative a university is in terms of academic knowledge and research. Academic research funding complements patent data in capturing the intensity of academic knowledge and research. It indicates the innovation ability of the universities, especially in the teaching aspect. Aid rate for disadvantaged students measures the proportion of economically underprivileged students receiving financial aid linked to the SPROUT Project or other government mechanisms. It captures the institution’s contribution to equity and public accessibility. Library holdings refer to the total quantity of physical and digital volumes available in the institution’s library, representing access to academic resources and institutional support. The freshman enrollment rate is calculated as the ratio of actual enrolled first-year students divided by the enrollment quota approved by the Ministry of Education. It suggests how competitive institutions are in the higher education market. International Graduate Count indicates the number of overseas or cross-border students graduating from the institution annually, serving as an indicator for internationalization and global engagement. Industry collaboration funding refers to the total amount of financial resources the university receives via such partnerships. This indicator reflects the institution’s societal relevance, engagement with the local community, and ability to secure non-governmental resources.

The overall performance of each HEI with the SPROUT framework is a composite overall development score constructed by aggregating seven normalized performance indicators aligned with the four core policy domains. These seven indicators are normalized using a min-max scale from min to max scaling and then grouped into their respective policy domains. Each sub-score is computed as the arithmetic mean of the indicators within that domain (two indicators for the first three domains and one for the last). The final composite score is then calculated as an equally weighted average of the four sub-scores. The equation of domain-specific sub-scores is shown below:

$$\begin{array}{cc}\hfill {\mathrm{O}\mathrm{v}\mathrm{e}\mathrm{r}\mathrm{a}\mathrm{l}\mathrm{l}\text{\_}\mathrm{S}\mathrm{c}\mathrm{o}\mathrm{r}\mathrm{e}}_{it}=& ɑ({Patent}_{it}+{AcadFunding}_{it})+ɓ({AidRate}_{it}+{Library}_{it})\hfill \\ \hfill & +ɕ({EnrollRate}_{it}+{IntlGrad}_{it})+ɗ {CoopFund}_{it}\hfill \end{array}$$

We assign equal weights (25% each) to teaching innovation, publicness, institutional distinctiveness, and social responsibility as they are equally important. The equal weight reflects the official and initial design of the SPROUT Project, which positions these four policy domains as equally important pillars in evaluating institutional performance. Moreover, this approach is consistent with both international practices and regional precedents. In the literature on composite indices, equal weighting is widely employed when there is no theoretical or empirical basis to prioritize specific dimensions, as it ensures transparency, comparability, and policy alignment [27,28]. We also applied Principal Component Analysis (PCA) to derive objective weights for the four domains as shown in

Table 3. Equal Weight, PCA, and Significant Correlation.

Measure	Equal Weight	PCA Weight
Teaching innovation (weight)	25%	0.5763
Public function (weight)	25%	0.2777
Distinctiveness (weight)	25%	0.4925
Social responsibility (weight)	25%	0.5901
Variance explained (PC1, %)	--	61.68%
Pearson correlation	--	0.9998
Spearman correlation	--	0.9996

.

The first principal component explained 61.68% of the variance, with loadings of 0.58 for teaching innovation, 0.28 for public function, 0.49 for distinctiveness, and 0.59 for social responsibility. The PCA-based composite index was almost perfectly correlated with the equal-weighted index with Pearson r = 0.9998 and Spearman’s ρ = 0.9996, p < 0.001, which also reaffirms the policy design, research hypothesis and findings of this study.

3.3. Data Analysis

This study employed Stata18MP and Tableau to transform and visualize data, conduct analysis, and estimate causal effects. The data analysis of this study was separated into several portions with the reported descriptive statistics, such as the amount of received SPROUT project funding, types of universities, and the number of teachers and students within each institution. It then proceeded to analyze the overall performance of universities after receiving the SPROUT Project by regions and types of institutions. Then, the result is provided by the overall performance and the fiscal sustainability index. It also showed the correlation and the causal effect estimation of the FSI and overall performance scores. The overall performance scores were divided into four different parts, so we could use TWFE to identify the effects.

4. Results

In this section, we reported the results of this study by the overall performance of the SPROUT Project, its equity-oriented funding, and the fiscal sustainability index of selected 20 universities in Taiwan.

4.1. SPROUT Project & Overall Performance

Table 4. SPROUT Project and Overall Performance.

Variable		N	Mean	Min	Max	Std. Dev.
Controlled Variables	Public/Private	889	0.68	0	1	0.47
	General/Technical	889	1.53	1	1	0.5
	Regions	889	2.78	1	4	1.07
	Number of tenure track professors	889	309.53	22	2097	259.66
	Number of students	889	8113.72	77	33,882	5902.04
	SPROUT Funding over billion	889	0.11	0	2.47	0.25
	Other Sources of Funding	862	1.8	0.01	21.31	2.22
Social Responsibility	Collaboration with Industry	876	0.16	0	2.83	0.34
Teaching Innovation	Number of patents	753	13.34	0	127	20.32
	Faculty Research Grants	854	0.18	0	4.74	0.49
Publicness	Eligible for Financial Aid	866	293.76	0	1,758	269.01
	Receiving Financial Aid	866	41.34	0	83.51	23.58
	Library Resources	884	199,745.4	8506	3,635,461	340,140.53
Distinctiveness	Registration Rate	883	82.83	15.7	100	14.71
	Number of International Graduates	840	97.11	1	737	116.9
Fiscal Sustainability Index		862	0.05	0	0.57	0.03

Note: N = 889.

presents the descriptive statistics for the key variables used to assess institutional performance under the SPROUT Project. The dataset includes 889 observations drawn from all HEIs in Taiwan participating in the program from 2018 to 2023. The variables are grouped by four policy objective dimensions, which are teaching innovation, publicness, institutional distinctiveness, and social responsibility.

For teaching innovation, the average number of formally approved university-held patents per institution was 13.34, and its variation ranged from 0 to 127. The amount of academic research received was 0.18, indicating a right-skewed distribution with some institutions receiving significantly higher funding than others. Such a pattern can also be observed from the minimum and maximum received academic research funding, as some institutions received 0, and some received 4.74. The mean of students who are eligible for financial aid and the ones who received such funding also suggests disparities in this area. In other words, not all institutions documented the number of students who are eligible for financial aid. Then, not every student who is eligible for financial aid takes advantage of such resources. The value of the standard deviation exceeding 340,000 also reflects significant differences in assessing financial resources.

As for institutional distinctiveness, the average freshman enrollment rate was 82.83%, suggesting relatively stable enrollment across these HEIs. This enrollment rate ranged from 60% to 100%, a notable dispersion. The average number of international graduates was 97.11 per year, while the actual number of students ranged from 1 to 737. Such a number suggests the level of internationalization varies. For social responsibility, the mean revenue from university–industry collaboration was 0.16 billion NTD, with several institutions documented in this area. This indicates a relatively limited and varied level of engagement with external societal stakeholders across this sector.

Among these indicators, the composite FSI showed a mean value of 0.05, with a maximum of 0.57. The low average FSI reflects the limited diversification of funding sources among most HEIs. Control variables such as faculty size, student enrollment, and institutional type were also included to support subsequent comparative and regression analyses. These results highlight the significant heterogeneity among Taiwan’s HEIs in both developmental outcomes and fiscal sustainability. The next section justifies further analysis of equity and institutional variation in the effectiveness of the SPROUT Project.

4.2. Equity-Oriented SPROUT Project

Educational excellence and equity reflect its ideology and also affect how the government allocates resources and tackles potential challenges. The SPROUT Project aims to fund universities based on their features, community collaboration, and research excellence. Do we observe any significant differences before and after implementing the SPROUT Project? Does the competitive and basic design of its funding formula impact after implementing for 5 years? The results of last year’s data is shown below:

Does the SPROUT Project meet its target? Figure 2 illustrates the distribution of SPROUT funding across different regions in Taiwan by institutional types in the recent 2022−2023 academic year. As the figure shows, the northern region still predominantly had more resources. HEIs in the northern region received 65% of funding, with 52.77% for public and 12.15% for private HEIs, respectively. The HEIs in the north are more than all the other HEIs outside the north region. The Southern region had 21.19% and the public HEIs were 17.97%, which is 6 times more than that of the private institutions. The Central region had a more balanced distribution in both public and private HEIs, with a percentage of 12.04% and there is no significant difference in private and public institutions. Notably, the East & Other Islands region received the least funding. Public HEIs received 1.36% while private HEIs received 0.48%, the least amount of regional funding.

Overall, such data reveal that regional disparities still exist in the current SPROUT Project funding allocation. The Northern region receives the most, being the most developed area, while the East & Other Islands region is severely under-resourced. Such imbalances may impact the ability of HEIs in less-funded regions to fulfill SPROUT objectives, highlighting the need for a more equitable distribution strategy. The next section reports how resources are allocated by core indicators of the SPROUT Project. The boxplots offer a comparative visualization of performance index across four dimensions– teaching innovation, institutional distinctiveness, social responsibility, overall score, and publicness—between public and private HEIs within the context of the SPROUT Project initiative.

As Figure 3 shows, public HEIs still show a higher median and a broader spread of scores. The IQR for public HEIs is larger, encompassing a wider range of performance levels, including outliers. Private HEIs have a more compressed distribution at lower overall scores, suggesting that public HEIs, as a group, achieve stronger overall performance under the structure of the SPROUT Project.

For teaching innovation, public HEIs exhibit a wider distribution, as shown in Figure 4. The median of public HEIs is notably higher, and there is a greater spread of values, including some outliers with high scores. Private HEIs, in contrast, show a more concentrated range of scores, clustered at lower values. This indicates that public HEIs, on average, demonstrate more diverse and potentially impactful teaching innovation practices after receiving the SPROUT Project funding. As for institutional distinctiveness, both public and private HEIs display relatively centered medians. However, public HEIs have a broader interquartile range and fewer extreme outliers in the lower range compared to private HEIs. Private HEIs show a wider spread at the lower end, suggesting that while some private institutions achieve high distinctiveness, others do not. Public HEIs maintain a consistent level of institutional distinctiveness after receiving the SPROUT Project funding.

For social responsibility, public HEIs show a higher median score and a wider distribution of scores, with several outliers reflecting exceptional performance, as Figure 5 shown. Private HEIs cluster at lower scores, with a narrow IQR, indicating that public HEIs are more actively engaged in, and recognized for, social responsibility initiatives funded or incentivized by the SPROUT Project. As public institutions are being more recognized for their social responsibility initiatives, that might also increase their active engagement. For publicness, private HEIs exhibit a higher median score and a more concentrated distribution around this median. Public HEIs show greater variability, with a lower median and some outliers. This suggests that private HEIs, despite their private status, are effectively fulfilling public functions as defined by the SPROUT Project, while public HEIs have a more dispersed performance in this dimension, possibly due to varying interpretations or priorities in delivering public service-related activities.

Public and private HEIs had divergent performance patterns after receiving the SPROUT Project funding, as Figure 3, Figure 4 and Figure 5 shown. Public HEIs tend to lead in teaching innovation, social responsibility, and overall performance. However, every institution performs slightly differently. Private HEIs show more consistency in institutional distinctiveness and publicness, but generally cluster more at lower scores in other dimensions. Why do private universities perform better in terms of institutional distinctiveness and publicness? It seems that private universities invest more, as per student expenditure, which can reach up to NT$160,000 annually compared to their public counterparts. Such a large amount of endowment allows them to provide students with more individualized learning experiences and quality environments, which subsequently leads to higher student enrollment. Some private institutions also received a good amount of donations, and Chung Yuan Christian University is one of them, with the maximum amount up to NT$150 million. Moreover, Taiwan has implemented a tuition reduction system for private universities since 2024, with an annual tuition reduction of NT$350,000 for undergraduates. Such initiatives addressed the equity issues, as fewer than 2% of low-income students attend elite public universities. These findings highlight the need for targeted policy adjustments within the SPROUT Project to accommodate the unique strengths and challenges of each HEI and equitable resource utilization across the higher education sector.

4.3. Fiscal Sustainability Index and the Overall University Performance

To examine equity in fiscal sustainability, the average FSI during 2018 to 2023 was compared by types of universities and regions. Public institutions consistently exhibit higher FSI values across all four macro-regions—North, Central, South, and the East & Islands, as shown below. This reflects relatively stable access to government funding, robust competitive grants, and greater ability to attract non-governmental revenue.

Public universities in the north region achieved an FSI of 0.064, significantly outperforming their private counterparts (0.042), as shown in Figure 6. This gap reflects the northern region’s concentration of resources and stronger financial funding was allocated to the public HEIs. The central region shows a similar trend: public universities (0.065 FSI) outscore private universities (0.044). While the difference is narrower than in the north, public HEIs still maintain a clear advantage, likely due to their regional funding policies and institutional support. In the south region, public universities report an FSI of 0.056, compared to 0.053 for private institutions. Here, the fiscal sustainability gap is smallest, suggesting more balanced resource distribution or innovative funding strategies among private HEIs in the south. Interestingly, the east & islands region exhibits the lowest overall FSI scores. Public universities score 0.047, and private universities 0.051—notably, private HEIs in this region outperform public ones slightly, a unique pattern possibly driven by localized funding models or their adaptability.

After reporting the FSI by regions and types of universities, this section proceeds with the analysis of the top 20 universities, as shown in

Table 5. Top 20 universities in overall score performance in SPROUT Project.

Rank	University	Types	Score	FSI
1	National Taiwan University	General	0.746	0.107
2	National Cheng Kung University	General	0.6	0.115
3	National Yang Ming Chiao Tung University	General	0.545	0.114
4	National Tsing Hua University	General	0.422	0.132
5	National Taiwan Normal University	General	0.38	0.035
6	National Taiwan University of Science and Technology	Technological	0.332	0.085
7	National Central University	General	0.327	0.08
8	National Chung Hsing University	General	0.316	0.07
9	National Sun Yat-sen University	General	0.308	0.076
10	National Kaohsiung University of Science and Technology	Technological	0.306	0.068
11	Feng Chia University	General	0.292	0.033
12	National Taipei University of Technology	Technological	0.281	0.066
13	National Chengchi University	General	0.275	0.067
14	National Yunlin University of Science and Technology	Technological	0.251	0.161
15	Taipei Medical University	General	0.246	0.053
16	Ming Chuan University	General	0.242	0.025
17	Tamkang University	General	0.242	0.027
18	Chung Yuan Christian University	General	0.239	0.043
19	Chang Gung University	General	0.238	0.035
20	Chang Gung University of Science and Technology	Technological	0.235	0.034

Note: The private universities are highlighted in gray color.

. Among these institutions, public universities overwhelmingly predominate 70%, and most of these universities are in the top 10 ranks. The average overall score for public universities is significantly higher (mean ≈ 0.3938) than that of private universities (mean ≈ 0.2175), indicating a structural disparity in performance outcomes.

Such results also show discrepancy similar to university by regions, and it appears to be closely related to FSI variations among those universities. Public universities exhibit a substantially higher average FSI (mean ≈ 0.084) than private universities (mean ≈ 0.036), suggesting that they not only receive more SPROUT Project funding but also rely more heavily on its performance-based allocations. Notably, institutions with higher FSI values tend to have higher scores. Among these universities, National Cheng Kung University in the South exhibits above 0.11 FSI scores and ranks top three in overall performance. This pattern suggests a positive association between financial sustainability and institutional performance. In contrast, private universities remain underrepresented in both the SPROUT Project rankings and competitive funding allocation. These findings underscore the critical role of financial sustainability in shaping institutional outcomes within Taiwan’s higher education system and highlight the need for funding strategies that balance performance and equity.

To further investigate the causal effect between fiscal sustainability and university performance after receiving SPROUT Project funding, we employ a two-way fixed effects regression model that controls for both university-specific heterogeneity and year-specific shocks.

$${Overall\_Score}_{i,t}=\alpha {FSI}_{i,t}+\beta X_{i,t}+{\mu }_i+{\sigma }_t+{\epsilon }_{i,t}$$

${Score}_{i,t}$ is the outcome variable, representing the score of the i^th university in year t. ${FSI}_{i,t}$ is the independent variable. $X_{i,t}$ refers to control variables, which are other factors that may affect the ${ Score}_{i,t}$, varying with university i and time t. ${\mu }_i$ means the specific fixed effects-university while ${\sigma }_t$ means the specific fixed effects-time. These are factors that are constant for a given university i over time, capturing the inherent characteristics of each university that do not change with time, such as the university’s long—standing reputation, basic infrastructure features that are stable. ${\epsilon }_{i,t}$ is the specific fixed effects. It represents the unobserved factors that affect ${Score}_{i,t}$ and are not captured by the other variables in the model, and it is assumed to be random and independent across observations. This current model incorporates several time-varying covariates, including the amount of annual funding (in billions), the number of full-time faculty, student enrollment, and a binary indicator for whether the institution is located in a developed region. All models are clustered at the university level to account for within-group correlation.

To ensure the validity of our two-way fixed effects (TWFE) results and address potential endogeneity concerns, we applied several diagnostic and robustness checks. We initially examined the variance inflation factors (VIFs) for all independent variables to assess potential multicollinearity. The mean VIF is 6.39, and all individual VIFs are below the commonly used threshold of 10, indicating that multicollinearity is not a concern in our regression models. We also employed cluster-robust standard errors at the university level to adjust both heteroskedasticity and arbitrary within-panel correlation. We further conducted Wooldridge’s test for serial correlation in panel data, to confirm the results. In addition, we performed a lagged one-period robustness check, in which the key independent variables were lagged by one year (t − 1) to predict the current-year outcome. This approach mitigates potential reverse causality and captures temporal effects, as certain policies or funding impacts may require time to manifest. The results of the lagged regressions remain largely consistent with the baseline estimates, with coefficients of the main predictors, including FSI and SPROUT Project funding, maintaining similar magnitudes and significance levels. This consistency indicates that the main findings are not driven by contemporaneous reverse causality and reinforces the reliability of the observed relationships.

Each model corresponding to a specific performance dimension reveals heterogeneous effects of the FSI, as shown in

Table 6. Fiscal sustainability and university performance.

Predictors	Model 1	Model 2	Model 3	Model 4	Model 5
	Overall_Score	Score_TeachInnov	Score_Publicness	Score_Distinct	Score_SocResp
FSI	0.042 ***	0.03	0.064 **	−0.039	0.081 ***
	(−2.78)	(−0.98)	(−2.43)	(−0.78)	(−2.9)
Sprout funding over billion	0.117 ***	0.104	0.053 **	0.114 **	0.297 ***
	(−3.82)	(−1.37)	(−2.03)	(−2.03)	(−4.17)
Number of tenure track professors	0.012	0.001 ***	−0.003	−0.016 ***	0.027
	(−0.57)	(−4.45)	(−1.13)	(−4.56)	(−0.85)
Number of students	0.003 ***	−0.004	0.005 ***	0.002 ***	0.003 ***
	(−8.5)	(−0.19)	(−4.93)	(−8.23)	(−2.63)
Rergion type	0.045 ***	0.177 ***	0.055 ***	0.325 ***	−0.077 ***
	(−2.55)	(−8.23)	(−3.55)	(−10.68)	(−4.93)
Prublic/Private	0.057 ***	0.021 *	0.365 **	−0.098 ***	0.026 **
	(−3.02)	(−5.32)	(−6.37)	(−2.15)	(−0.87)
General/Technical	0.025 *	−0.024 **	0.256 ***	0.064 **	−0.045
	(−0.91)	(−0.83)	(−4.25)	(−2.56)	(−0.34)
Constant	0.043 ***	−0.109 ***	−0.001	−0.035 ***	0.008 ***
	(−4.73)	(−4.26)	(−0.85)	(−9.25)	(−3.41)
Observations	691	708	795	773	795
Number of uni_id	121	126	144	137	144
R-squared	0.489	0.281	0.642	0.261	0.335

Note: Significance levels *** p < 0.01, ** p < 0.05, * p < 0.1. t-statistics are in parentheses.

. In Model 1, stronger fiscal sustainability is associated with improved overall institutional performance. Similarly, FSI is positively and significantly associated with publicness and social responsibility, indicating that institutions with higher financial adaptability are more likely to fulfill their public responsibilities and social engagement missions. Conversely, FSI does not exert a statistically significant influence on teaching innovation or distinctness, suggesting that fiscal sustainability does not necessarily promote innovation in teaching practices or the cultivation of distinctive institutional features. Among the control variables, both institutional funding and student enrollment exhibit consistent positive effects upon overall and social responsibility scores, while the number of faculty shows mixed results. Notably, universities located in developed regions tend to perform significantly better across most dimensions, particularly in terms of teaching innovation and institutional distinctiveness. These findings suggest that fiscal sustainability contributes positively to the broader mission and public accountability of higher education institutions but has a limited impact on pedagogical innovation and differentiation.

5. Conclusions & Discussions

This section presents conclusions and discussions on fiscal sustainability, equity, and the SPROUT Project funding allocation, as well as the relationship between fiscal sustainability and institutional performance. It also discusses the implications of such implementation in other contexts outside Taiwan, as well as Goal 2030.

5.1. Overview of Fiscal Sustainability

The results showed that universities had different levels of fiscal sustainability in terms of developmental outcomes. In teaching innovation, the average number of university-held patents and academic research funding indicates that some institutions received significantly more funding. For publicness, the percentage of students receiving financial aid and library resources also suggests disparities in social support and access to knowledge.

As for institutional distinctiveness, the average freshman enrollment rate was 82.83%, while the average number of international graduates was 97.11 per year, pointing to divergent levels of internationalization and enrollment competitiveness. In terms of social responsibility, the mean revenue from university-industry collaboration was 0.16 billion NTD, with some institutions reporting no such income, suggesting relatively limited and uneven engagement with external stakeholders. The Composite FSI, a measure of funding source diversification, showed a low mean value of 0.05, with a maximum of 0.57, reflecting limited diversification among most HEIs. These descriptive statistics underscore the diverse landscape of HEIs and justify further in-depth analysis of equity and institutional variation in the effectiveness of the SPROUT Project funding.

5.2. Equity & SPROUT Project

Unlike previous policy paradigms that tend to allocate resources to elite universities, the SPROUT Project applies an equity-minded approach. However, the result of this study still shows structural disparities as public and private HEIs demonstrate divergent performance patterns across SPROUT-related indicators. Public HEIs tend to lead in teaching innovation, social responsibility, and overall performance. Teaching innovation is also more diverse and impactful, and they show greater engagement and recognition in social responsibility initiatives. While Private HEIs generally cluster at lower overall scores, they show more consistency and higher median scores in institutional distinctiveness and publicness. This relatively stronger performance in publicness and distinctiveness for private HEIs is attributed to factors such as high per-student expenditure, learning environments, and substantial donations.

The result of this study also shows that its equity approach has not fully achieved regional balance. There are significant regional disparities in allocating SPROUT Project funding. After implementing the SPROUT Project for 5 years, the HEIs in the north region still had the most resources after combining all three regions. These regional imbalances may impede HEIs in less-funded regions from achieving the objectives of the SPROUT Project. Public institutions consistently exhibit higher FSI values across all four regions, reflecting more stable access to government funding and stronger competitive grant performance. Public universities in the northern region generally all had above FSI, and such a trend is similar in the Central region. While the fiscal sustainability gap is smallest in the Southern region (public FSI 0.056 vs. private 0.053), the East & Islands region presents a unique pattern where private HEIs slightly outperform public ones in FSI, possibly due to localized funding models or private institutional adaptability to resource constraints.

These findings indicate that while the SPROUT Project has introduced an equity-oriented funding framework, the persistence of structural disparities calls for further refinement in policy design. In particular, differentiated allocation formulas could better account for institutional types and regional differences, preventing resource concentration in some elite HEIs. As for the existing differences between public and private institutions, policy implementation should consider mechanisms based on private HEIs’ contributions to distinctiveness and publicness with fiscal sustainability. As for region, more targeted resources for each student in central, southern, and eastern institutions would help mitigate the differences based on the results of this study as well as other similar studies [29]. Such adjustments are essential if the SPROUT Project is to achieve both fiscal sustainability and equity across Taiwan’s higher education system.

5.3. Fiscal Sustainability and Institutional Performance

Top 10 public universities overwhelmingly took up 70% of the SPROUT Project, and the overall score for public universities is also significantly higher than that of private universities, indicating a structural disparity. Overall, score for public universities is public universities also exhibit a substantially higher average FSI compared to private universities. This suggests that the amount of funding is also similarly aligned with the university ranking in Taiwan, particularly the performance-based allocations of the SPROUT Project funding. Notably, institutions with higher FSI values tend to have higher scores in the SPROUT Project. Top-performing public universities such as National Cheng Kung University had the FSI above 0.11. This pattern suggests a positive association between fiscal sustainability and institutional performance, particularly within the public sector, raising questions about equity and sustainability for private institutions according to the current resource distribution model.

A two-way fixed effects regression model was employed to examine the causal effect of fiscal sustainability and university performance. The results from five models reveal heterogeneous effects of the FSI. FSI is statistically significant and positively associated with overall institutional performance, suggesting that stronger fiscal sustainability generally leads to improved institutional outcomes. Specifically, FSI is positively and significantly related to publicness and social responsibility scores, indicating that institutions with higher financial adaptability are more likely to fulfill their mission of public responsibilities and social engagement. The FSI does not exert a statistically significant influence on teaching innovation or institutional distinctiveness scores. This suggests that fiscal sustainability contributes to the broader mission of public accountability, and its impact on pedagogical innovation and the cultivation of distinctive institutional features may be limited.

5.4. Movement Toward Goal 2030 and Taiwan’s Higher Education Sprout Project

The results of this study show how HEIs can achieve partial sustainable development goals of Goal 2030 via fiscal sustainability and equitable resource allocation. Taiwan’s pivot toward a funding-for-all paradigm—allocating baseline subsidies to every institution and supplementing these with performance-based grants—has attenuated the historical concentration of resources among elite universities. This also reflected Taiwan’s attempt in achieving Goal 2030, Goal 4—Quality Education, and Goal 10 Reduce Inequality. The SPROUT Project combines stable baseline funding with competitive allocations can strengthen the fiscal sustainability of smaller and/or rural universities, which contribute to the regional balance. Taiwan’s experience suggests that an explicit subsidy equation can partially offset existing structural inequalities. For example, the SPROUT Project’s baseline grant for each institution guarantees minimal operational stability, even for universities in rural areas.

Taiwan’s SPROUT Project funding regards quality education, including curriculum innovation, student support, and industry collaboration. This broader performance framework has enhanced institutional incentives to balance research excellence with community outreach and pedagogical reform. Such funding allocation also suggests that competitive funding should include not only publication metrics but also multidimensional performance indicators, which are teaching innovation, publicness, institutional distinctiveness, and social responsibility. Then, transparent reporting and public disclosure of SPROUT funding allocations have been improving systematic accountability and quality education. Comprehensive online dashboards detailing each institution’s funding share, performance scores, and sub-index breakdowns have enabled stakeholders—government agencies, educators, and the public—to monitor progress and potential inequities. The case of SPROUT Project and how policy was implemented could also provide implications outside Taiwan.

China also implemented Double First-Class Project (DFCI) in pursuit of world-class universities and achieve quality education [30]. DFCI primarily allocates substantial funding toward a cohort of world-class institutions, which has yielded rapid improvements in research output and escalated international rankings [31]. DFCI evaluation criteria tend to emphasize research-centric metrics (SCI/SSCI publications, citation indices) with limited attention to social responsibility or teaching quality of HEIs [32]. It also reinforces geographic imbalances, as many designated world-class universities are located in cities such as Beijing, Shanghai, and the rest are mostly in well-developed eastern coastal provinces [33]. China’s DFCI reporting also tends to focus on aggregated institutional achievements rather than granular financial data, which can obscure disparities and reduce opportunities for external scrutiny [34]. Adopting more transparent practices—such as publishing annual DFCI funding reports across regions and discipline—level breakdowns—could foster engagement among stakeholders and help policymakers identify unintended consequences. Policy implementation mechanism to ensure baseline funding for the tier-2 or tier-3 institutions in central and western regions could also enhance fiscal sustainability of those universities and mitigate the risk of establishing ghost universities to achieve regional balance [35]. Then, incorporating similar multidimensional evaluation criteria could allocate resources toward teaching innovation [36,37] and public service projects and foster more resilient, socially engaged institutions to achieve quality education for all [38].

The recommendations outlined above not only aim to enhance quality higher education in Taiwan and China but also hold broader significance for educational research aligned with the 2030 Agenda for Sustainable Development. In particular, they underscore the imperative to balance excellence with equity—ensuring that quality education is both inclusive and accessible. Research in this context must increasingly focus on the institutional conditions, funding structures, and governance models that foster sustainable development across higher education systems. The integration of regional equity mechanisms, cross-institutional collaboration, and diversified performance metrics reflects a paradigmatic shift toward systemic resilience and long-term educational sustainability. As such, future research should further investigate how national excellence initiatives can be restructured to support SDG 4, Quality education and SDG 10, Reduce inequality, particularly in terms of reducing inter-institutional disparities, promoting inclusive innovation, and enhancing the adaptability of higher education to changing socio-economic contexts.