Knowledge Commercialization and University Audit Fees: A UK-Based Study

In the face of stiffening sector competition and reduced government funding, universities in many countries increasingly seek to diversify their revenue. One prominent way employed by universities to achieve revenue diversification is the commercialization of research knowledge. However, knowledge commercialization could be regarded as a risky enterprise for many institutions, especially those lacking the capacity to support commercial activity. To investigate these issues, we examine the impact of knowledge commercialization on the audit fees charged to UK universities. Using a panel dataset covering 2010/11–2019/20, we find that knowledge commercialization is positively associated with university audit fees, indicating that auditors may charge more to compensate for the greater workloads and risks associated with auditing universities with more commercial activity. Further analysis shows that the positive commercialization–fees relationship is weaker in universities that spend more on research and science, technology, engineering, and mathematics (STEM) subjects, suggesting that auditors perceive knowledge commercialization activities as carrying lower risk if the university has more capacity for undertaking research that can be commercialized. We conclude by discussing the implications of what we identify as a growing divergence among universities in their ability to commercialize research knowledge as perceived by auditors.