The allocation of funding for higher education typically focuses on competition in neoliberal mechanisms. Surprisingly, much less attention has been paid to considering the effect of fund allocations for sustainable development through public goods purposes in neoliberal contexts. This study aims to examine specific funding schemes and determine the influential factors impacting funding for teaching, research, and public goods transformation. Taking Taiwan’s Higher Education Sprout Project (HESP) as an example, we explored the effect of policy initiatives on public goods transformation towards sustainable development. The data were collected from the Ministry of Education and Scopus databases. First, a regression analysis was conducted to determine which factors influence the effect of funding allocations in academic institutes. Second, we used a logistic regression to detect the effects of the system and the sector. Third, we used partial least square structural equation modeling (PLS-SEM) to explore the causal effects among the selected impact variables on expected outcomes. Finally, we used the bootstrap method to demonstrate the model’s robustness. Our study found that only diversity was shown in private technology groups receiving less HESP funding, while it did not widen the differences in the sector and system in the transformation process. Our findings suggest that funding allocations will not affect teaching and research based on sectors and systems. In contrast, this study demonstrates that transforming public goods through special funding can play a critical role in leading sustainable development in higher education.