New institutional economics outlook for uncovering frictions in implementing the new Philippine graduate education policy

Purpose Knowledge production is an essential component of economic growth, giving rise to the literature on research productivity, particularly within universities. Recent studies have highlighted the impact of institutional factors on knowledge production, and their complexities are particularly pronounced in developing economies, such as the Philippines, which has performed poorly in the region over recent decades. Responding to the call to leapfrog in research productivity, the designated policymaking body introduces a new graduate education policy that centers on graduate training. This study aims to present a policy analysis of the potential of this new measure and identifies the institutional frictions that arise during its implementation. Design/methodology/approach The new graduate education policy is positioned within emerging and established institutions, which would shape organizational arrangements to facilitate transactions supportive of the policy. Thus, along this frame, this study adopts the lens of New Institutional Economics to examine how the new policy navigates through institutions and the anticipated frictions in its implementation. This study critically examines these institutions, their incentive structures, underlying transaction costs, the social norms that shape these structures and transaction costs and the enforcement of the new policy. Findings The critical analysis identifies the following frictions: (1) misalignments between institutional rules and capacities of agents, (2) limited incentives for interdisciplinary programs and (3) weak alignment of tenure policies with the desired outcomes of the new policy. Several transaction costs have been identified, and the difficulty of allocating these costs to various agents is becoming increasingly apparent. Finally, social norms may hinder its implementation, such as prioritizing teaching over research, part-time student enrollment, the unpopularity of joint supervision and the path dependency of most institutional university frameworks. Originality/value To the best of the authors’ knowledge, this work is the first to critically examine the new Philippine graduate education policy through the lens of New Institutional Economics, offering policymakers strategic foresight to make the reform more context-sensitive, align formal rules with actual behavior and adjust incentive structures and organizational capacities.