From academic excellence to market attractiveness: explaining the transformation gap in higher education institutions

Purpose This study examines why academic performance does not necessarily translate directly into market attractiveness in higher education institutions. Drawing on capability, institutional and signaling perspectives, it frames this disconnect as a transformation gap: an explanatory condition in which internally generated academic value requires strategic and relational mechanisms to become externally recognized market value. The transformation gap is not treated as a separate latent construct. Design/methodology/approach A quantitative explanatory design was used with 300 strategic-level academic and administrative respondents in Indonesian higher education. Four reflective constructs – academic performance (AP), strategic positioning (SP), relational signaling (RS) and market attractiveness (MA) – were assessed using Partial least squares structural equation modeling (PLS-SEM). The reported evaluation includes reliability and convergent validity, heterotrait–monotrait ratio (HTMT), collinearity, R2, Q2, f2 and bootstrapping with 5,000 resamples. Findings Academic performance was not significantly related to market attractiveness directly (β = 0.07, t = 1.12, p > 0.05), so H1 was not supported. Academic performance was positively related to strategic positioning (β = 0.41, t = 6.85, p < 0.001) and relational signaling (β = 0.38, t = 6.10, p < 0.001). Strategic positioning (β = 0.46, t = 7.92, p < 0.001) and relational signaling (β = 0.24, t = 4.25, p < 0.001) were positively related to market attractiveness. The indirect effects through strategic positioning (β = 0.19, t = 5.80, p < 0.001) and relational signaling (β = 0.09, t = 3.95, p < 0.01) were significant, indicating an indirect-only mediation pattern, traditionally described as full mediation. Research limitations/implications The study is limited by its cross-sectional, single-source survey design, which restricts causal inference and does not eliminate potential common method bias. The purposive sampling approach and focus on Indonesian private higher education institutions may also limit generalizability across institutional and national contexts. Moreover, market attractiveness was measured perceptually rather than through objective market outcomes. Future research should employ longitudinal, multi-source and cross-national designs and incorporate objective indicators such as enrollment, retention, graduate employability, employer evaluations and institutional sustainability to further examine the transformation-gap perspective. Practical implications The findings suggest that university leaders should complement academic excellence with deliberate strategic positioning and relational signaling. Institutions can translate academic strengths into market attractiveness by differentiating program value, aligning offerings with stakeholder needs, strengthening industry and alumni partnerships and communicating credible evidence of academic achievements and graduate outcomes. Managers should therefore monitor not only internal academic performance but also how effectively these achievements are converted into relevant and visible market signals. Importantly, such strategies should complement, rather than substitute for, sustained academic quality. Social implications The findings suggest that translating academic strengths into credible and accessible external signals can help prospective students and other stakeholders make better-informed educational choices. Stronger university–industry and stakeholder relationships may also improve the alignment of academic programs with societal and employment needs. However, efforts to enhance market attractiveness should remain consistent with educational access, inclusion, academic quality and institutional social missions. Thus, strategic positioning and relational signaling should support not only institutional visibility but also broader contributions to employability, stakeholder engagement and social development. Originality/value The contribution lies in distinguishing academic value creation from external value recognition and in specifying two complementary conversion mechanisms. Strategic positioning makes academic value relevant and differentiated, whereas relational signaling makes that value visible and credible. The findings are consistent with a transformation-gap interpretation without claiming validation of a new psychometric construct.