Abstract

The goal of the paper is to advance our understanding of competition in public grant systems. Following economic sociology, we conceptualize competition as an interactive process between funders and researchers, which takes place in a context of uncertainty on the respective behavior. Accordingly, we suggest that mutual adjustment processes across different funding cycles are key to the creation of stable grant funding markets. We focus our analysis on two concepts suggested by the sociology of markets, i.e. grant desirability and scarcity. Using these lenses, we provide an exemplary analysis of the market interaction for the ERC grant schemes, and we study how funders and potential applicants adjusted grant conditions, respectively application behavior, to the outcomes of competition. Our findings suggest a dual role of desirability in creating a large pool of potential applicants and of scarcity in moderating the number of effective applications; we however highlight the central role of signals on (differential) success chances to avoid a lottery effect and to spark high investment in proposals by applicants. Results are of policy relevance, as they show that grant market competition can be only partially organized ex-ante, and the interaction process between funders and researchers might lead to unexpected effects; accordingly, we suggest that the achievement of policy goals also depends on the ability of funders to design suitable adjustment strategies.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4600284