Government Policies as a Moderator of Resource Capabilities and Industrial Competitiveness Toward Malaysian Private Higher Education Institution Performance: A Theoretical Framework

Abstract

The private higher education sector has emerged as a crucial part of Malaysia's higher education framework. However, managing a private higher education institution has become increasingly intricate. PHEIs are required to attract students, skilled faculty, industry collaborations, and ensure financial viability while adapting to technological advancements, curriculum changes, and regulatory requirements. In this context, institutional performance is unlikely to hinge on a singular factor. Instead, it is likely to arise from the interplay of an institution's resources, how it utilises them, its response to competition, and its effectiveness in navigating the regulatory landscape. This perspective aligns with strategic management literature, especially the Resource-Based View (RBV), which posits that an organisation’s performance can be impacted by the resources and capabilities it manages and cultivates (Barney, 1991; Wernerfelt, 1984). From this standpoint, resources are not inherently valuable due to mere ownership; their strategic worth is contingent upon the institution's capacity to leverage, combine, and renew them to create value and sustain a competitive edge. In the context of higher education, this viewpoint holds particular significance as the resources of institutions are predominantly knowledge-driven. Factors such as academic personnel, programme offerings, organisational knowledge, technological prowess, research capabilities, and innovation efforts can shape how an institution distinguishes itself from its rivals. Mainardes et al. (2011) similarly contended that competitive advantage in higher education should be viewed through the lens of the interplay between internal resources, external circumstances, and stakeholders rather than solely from an internal viewpoint. Concurrently, the external environment is also significant. PHEIs function in a marketplace where students are able to compare institutions based on programmemes, fees, facilities, academic reputation, and employment prospects. Recent research in Malaysia illustrates that students’ perceptions and expectations can impact how PHEIs formulate their academic and marketing approaches (Krishnaswamy et al., 2023). More recent findings also reveal that factors such as institutional reputation, faculty credentials, programme availability, financial aspects, and career development weigh heavily in students' choices when selecting Malaysian private higher education institutions (Chain et al., 2025). The significance of internal capabilities has also gained renewed focus. For instance, Chan and Muthuveloo (2022) explored the connections among people capabilities, strategic agility, and institutional performance within Malaysian private higher education institutions. Their results indicate that the link between organisational resources and performance may not always be straightforward, emphasising the necessity of understanding the mechanisms and circumstances that enable capabilities to be translated into performance. Innovation provides another important example. Recent studies involving Malaysian PHEIs have examined how intellectual capital, information technology capabilities and frugal innovation can help institutions respond to financial and technological constraints (Jayabalan & Dorasamy, 2024; Jayabalan et al., 2024). These studies reinforce the view that PHEIs need to continuously develop and reconfigure their capabilities rather than rely solely on existing resources. However, internal capabilities and competitive conditions do not operate in isolation. PHEIs are also strongly influenced by government policies, regulatory requirements, accreditation mechanisms and other institutional arrangements. Recent higher education policy research indicates that the effects of government policies on universities are often complex and may vary according to organisational and contextual conditions (Salmon, 2025). This observation provides an important theoretical basis for examining government policy not merely as another external factor, but as a condition that may change the strength of relationships between organisational capabilities, competitive conditions and institutional performance. Therefore, this article proposes a theoretical framework in which Government Policies function as a moderator between Resource Capabilities, Industrial Competitiveness and PHEI Performance.