Public sector research - core policy instruments - discretionary organisational funding



Discretionary organisational funding, commonly known as ‘block grants’, is the traditional funding instrument for public research. It is targeted at research universities and PRIs rather than at individual researchers and research groups and involves them receiving public funds according to various criteria (e.g. formulae, performance indicators, or budget negotiations) to fulfil their research and teaching missions. Discretionary organisational funding provides these organisations with stable funding and a certain degree of autonomy in the selection of their research.


Broadly, what activities and outcomes does discretionary organisational funding seek to influence?

Discretionary organisational funding typically covers the salaries of many research and support staff in research universities and PRIs and contributes substantially to the costs of operating and maintaining much of the hard infrastructure needed to perform research, including laboratories, collections, and libraries. It also provides research universities and PRIs with a certain degree of freedom to support chosen research areas according to their strategic priorities and particular research strengths and focus. This type of funding contributes most to supporting the scientific record but also influences the pace and direction of technological development in those research institutes where this is a major objective.


How does discretionary organisational funding have an influence?

Discretionary organisational funding is used to support the necessary conditions for a healthy research system. It provides much-needed stability in funding that allows research performing organisations to invest in research equipment and buildings, to provide researchers and support staff with open-ended employment contracts, and to undertake lines of research over the medium-to-longer term that might also be more curiosity-driven. Competitive R&D project grants, by contrast, cover only some of the overheads of performing research, are of relatively short duration (typically 1-3 years) and often have a short-term, problem-oriented orientation. Discretionary organisational funding also provides public research with a degree of autonomy, a central pillar of the scientific community’s ‘contract’ with society.


OECD countries use different approaches (e.g. formulae, performance indicators, or budget negotiations) for calculating the allocation of discretionary organisational funding. In recent years, there has been a tendency for countries to move from input-oriented to more output-oriented funding:

  • Input-oriented funding typically aims to ensure that public sector research has sufficient financial resources to fulfil its research mission. Allocation is often based on formulae that take into account the volume (e.g. the number of research-active staff employed by the organisation) and cost (e.g. variable according to scientific disciplines) of research.
  • By contrast, output-oriented funding aims to introduce performance considerations (e.g. quality and impact of research performed by organisations) into the allocation calculation. It seeks to recast the science community’s contract with society by making a more explicit link between scientific autonomy and accountability for the money spent.


What factors should be considered when implementing discretionary organisational funding?

Several factors should be considered when implementing discretionary organisational funding:

  • Scope and scale of public research: research systems have continued to grow in most OECD countries – in terms of the number of researchers employed and the amounts of money spent. In the context of public budgetary constraints, there is likely to be pressure on discretionary organisational funding, together with calls for greater accountability on its allocation.
  • Burden of accountability: while organisations receiving discretionary organisational funding do not have the burden of accounting in detail for their expenditure, they are increasingly expected to be accountable for the performance of their research. How this is done in practice varies between countries and can be quite burdensome on researchers, research universities and PRIs, as well as on research funding organisations themselves.
  • Balance in public sector research funding regimes: if discretionary organisational funding is too generous, research performers will have few incentives to apply for competitive R&D project grants or to engage in R&D collaboration with industry. Moreover, the relative autonomy provided to research performing organisations by discretionary funding leaves little room for policy-making organisations and public research funding organisations to effectively orientate public sector research towards certain public policy priorities. For these reasons, this sort of funding needs to be appropriately balanced with the need for research performers to apply for competitive R&D project grants.


Further resources

HEFCE (2010), Guide to funding: How HEFCE allocates its funds, Bristol: Higher Education Funding Council for England.

Public sector research

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Discretionary organisational funding

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Centres of excellence

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Science and technology parks

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Risk capital measures in support of spin-offs

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Innovation vouchers

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