Fishing for Complementarities: Competitive Research Funding and Research Productivity

In most countries in Europe, where universities have primarily been financed through block grants, governments have introduced or increased the amount of funding distributed through competitive funding schemes (Stephan, 2012). Additionally, shrinking public research budgets meant that researchers are increasingly encouraged to look for funding elsewhere, e.g. source funding from industry and other sponsors. This resulted in a shift towards private sponsorship in most OECD countries (OECD, 2010). Funding from multiple sponsors can facilitate resource-intensive research, while at the same time creating the challenge to attribute research efforts and human resources to each project. Importantly, given the significant effects of industry grants on research outcomes (Hottenrott and Thorwarth, 2011; Banal-Estañol et al., 2013), it is of interest whether industry sponsorship accelerates or compromises the positive effect of public research funding.

Thus, when studying the relationship between research funding and research productivity, it is important to note that industry sponsorship cannot be evaluated without considering its impact on the productivity effects from other types of funding. The effect could be positive if industry and public grants promote research that is complementary, whereas a negative effect might indicate that scientists face a trade-off between allocating time and research effort to one or the other sponsor. This study aims to fill a gap in the literature by investigating the joint effect of funding from public and private sponsors on the research productivity in terms of quantity and quality of a sample of 809 engineering academics from 15 universities in the UK.

We find that industry funding decreases the publication increase associated with public funding by reducing the marginal effect of public grants on publication outcomes in . This indicates that researchers are working at full capacity and increases in funding do not translate into comparative increases in research output when multiple sponsors are involved. This negative interaction effect is found for co-sponsorship from UK funders, which include UK research councils and charities, but is insignificant for EU grants. At the same time it is important to note that industry funding does not compromise the positive effect of public funding but only reduces the rate of publication increase associated with public grants. We further note, that significant benefits in terms of publication output can only be observed for increases in UK public funding. The results also show that EU funding does not independently increase publication rates. The results help to inform the debate on how industry and public funding jointly affect research productivity. They show that it is important to maintain high levels of public funding to ensure the quality of the higher education research sector.

Hottenrott, Hanna and Cornelia Lawson (2013), Fishing for Complementarities: Competitive Research Funding and Research Productivity, ZEW Discussion Paper No. 13-113, Mannheim, published in: International Journal of Industrial Organization.