Scientific Grant Funding

This chapter provides an overview of grant funding as an innovation policy tool aimed at both practitioners and science policy scholars. We first discuss how grants relate to other contractual mechanisms such as patents, prizes, or procurement contracts, and argue that, among these, grants are likely to be the most effective way of supporting early stage, exploratory science. Next, we provide a brief history of the modern scientific grant and discuss the current state of knowledge regarding several key elements of the design of grant programs: the choice of program scope, the design of peer review, as well as approaches for creating incentives for risk-taking and translation for grant recipients. We argue that, in making these choices, policy-makers might consider adopting a portfolio-based mindset that seeks a diversity of approaches, while accepting that high failure rates for individual projects is in fact part of an effective grant-making program. Finally, increased rigor in the evaluation of grant programs is likely to raise the quality of funded proposals. In particular, randomized controlled trials and other quasi-experimental techniques might enable policy makers to communicate and enhance the impact that these programs have on discovery and innovation, thereby creating a stronger justification for their expansion or continued existence. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.