IDEAS home Printed from https://ideas.repec.org/a/eee/respol/v54y2025i1s0048733324001781.html
   My bibliography  Save this article

A portfolio approach to research funding

Author

Listed:
  • Canton, Erik

Abstract

This study argues that portfolio theory can provide a powerful tool to make research funding decisions. The proposed methodology allows for an informed management decision process, also in the presence of project interdependencies and multiple policy objectives. Despite its potential to improve funding decisions, the portfolio model is not widely applied in practice. The most common approach is merit-based funding where the evaluators' scores of the individual proposals guide funding decisions. A possible explanation is that conventions play a role in the selection process. Survey data show that policy practitioners working in the field of research and innovation policy have a relatively strong preference for the merit-based funding model, suggesting the presence of a “club-effect”.

Suggested Citation

  • Canton, Erik, 2025. "A portfolio approach to research funding," Research Policy, Elsevier, vol. 54(1).
    • Handle: RePEc:eee:respol:v:54:y:2025:i:1:s0048733324001781
    DOI: 10.1016/j.respol.2024.105129
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0048733324001781
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.respol.2024.105129?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Benjamin F. Jones & Lawrence H. Summers, 2020. "A Calculation of the Social Returns to Innovation," NBER Chapters, in: Innovation and Public Policy, pages 13-59, National Bureau of Economic Research, Inc.
    2. Andy Stirling, 2007. "A General Framework for Analysing Diversity in Science, Technology and Society," SPRU Working Paper Series 156, SPRU - Science Policy Research Unit, University of Sussex Business School.
    3. Hall, Bronwyn H. & Lerner, Josh, 2010. "The Financing of R&D and Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 609-639, Elsevier.
    4. Mariana Mazzucato & Gregor Semieniuk, 2017. "Public financing of innovation: new questions," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(1), pages 24-48.
    5. Klavans, Richard & Boyack, Kevin W., 2017. "Research portfolio analysis and topic prominence," Journal of Informetrics, Elsevier, vol. 11(4), pages 1158-1174.
    6. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    7. Jonathan Linton & Nicholas Vonortas, 2015. "From Research Project to Research Portfolio: Meeting Scale and Complexity," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 9(2), pages 38-43.
    8. Albert Banal-Estañol & Inés Macho-Stadler & David Pérez-Castillo, 2019. "Funding academic research: grant application, partnership, award, and output," Economics Working Papers 1658, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Bozeman, Barry & Youtie, Jan, 2017. "Socio-economic impacts and public value of government-funded research: Lessons from four US National Science Foundation initiatives," Research Policy, Elsevier, vol. 46(8), pages 1387-1398.
    10. Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Anthony Bartzokas & Sunil Mani (ed.), Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2, Edward Elgar Publishing.
    11. Paul M. Romer, 2001. "Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 221-252, National Bureau of Economic Research, Inc.
    12. Gregor Dorfleitner & Michaela Leidl & Johannes Reeder, 2012. "Theory of social returns in portfolio choice with application to microfinance," Journal of Asset Management, Palgrave Macmillan, vol. 13(6), pages 384-400, December.
    13. Pere Arqué-Castells & Daniel F. Spulber, 2022. "Measuring the Private and Social Returns to R&D: Unintended Spillovers versus Technology Markets," Journal of Political Economy, University of Chicago Press, vol. 130(7), pages 1860-1918.
    14. Benedetto Lepori & Ben Jongbloed & Diana Hicks, 2023. "Introduction to the Handbook of Public Funding of Research: understanding vertical and horizontal complexities," Chapters, in: Benedetto Lepori & Ben Jongbloed & Diana Hicks (ed.), Handbook of Public Funding of Research, chapter 1, pages 1-19, Edward Elgar Publishing.
    15. Matthew L. Wallace & Ismael Rafols, 2015. "Research portfolios in science policy: moving from financial returns to societal benefits," SPRU Working Paper Series 2015-10, SPRU - Science Policy Research Unit, University of Sussex Business School.
    16. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    17. Nicholas G. Hall & John C. Hershey & Larry G. Kessler & R. Craig Stotts, 1992. "A Model for Making Project Funding Decisions at the National Cancer Institute," Operations Research, INFORMS, vol. 40(6), pages 1040-1052, December.
    18. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
    19. Ernst Fehr & Urs Fischbacher, 2004. "Social norms and human cooperation," Macroeconomics 0409026, University Library of Munich, Germany.
    20. Schot, Johan & Steinmueller, W. Edward, 2018. "Three frames for innovation policy: R&D, systems of innovation and transformative change," Research Policy, Elsevier, vol. 47(9), pages 1554-1567.
    21. Dosi, Giovanni & Llerena, Patrick & Labini, Mauro Sylos, 2006. "The relationships between science, technologies and their industrial exploitation: An illustration through the myths and realities of the so-called `European Paradox'," Research Policy, Elsevier, vol. 35(10), pages 1450-1464, December.
    22. Scott E. Page, 2007. "Prologue to The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies," Introductory Chapters, in: The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies, Princeton University Press.
    23. Jonathan Linton & Nicholas Vonortas, 2015. "From Research Project to Research Portfolio: Meeting Scale and Complexity," Foresight-Russia Форсайт, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 9(2 (eng)), pages 38-43.
    24. Osterloh, Margit & Frey, Bruno S., 2020. "How to avoid borrowed plumes in academia," Research Policy, Elsevier, vol. 49(1).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stojkoski, Viktor & Hidalgo, César, 2025. "Optimizing Economic Complexity," TSE Working Papers 24-1623, Toulouse School of Economics (TSE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.
    2. Andreas Lichter & Max Löffler & Ingo E. Isphording & Thu-Van Nguyen & Felix Poege & Sebastian Siegloch, 2025. "Profit Taxation, R&D Spending, and Innovation," American Economic Journal: Economic Policy, American Economic Association, vol. 17(1), pages 432-463, February.
    3. Bracht, Felix & Verhoeven, Dennis, 2025. "Air pollution and innovation," Journal of Environmental Economics and Management, Elsevier, vol. 130(C).
    4. John Van Reenen, 2022. "Innovation and Human Capital Policy," NBER Chapters, in: Innovation and Public Policy, pages 61-83, National Bureau of Economic Research, Inc.
    5. Queralto, Albert, 2020. "A model of slow recoveries from financial crises," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 1-25.
    6. Anders Gustafsson & Andreas Stephan & Alice Hallman & Nils Karlsson, 2016. "The “sugar rush” from innovation subsidies: a robust political economy perspective," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(4), pages 729-756, November.
    7. Thomas H. W. Ziesemer, 2021. "The Effects of R&D Subsidies and Publicly Performed R&D on Business R&D: A Survey," Hacienda Pública Española / Review of Public Economics, IEF, vol. 236(1), pages 171-205, March.
    8. Ghiglino, Christian & Tabasso, Nicole, 2016. "Risk aversion in a model of endogenous growth," Journal of Mathematical Economics, Elsevier, vol. 64(C), pages 30-40.
    9. Brown, James R. & Martinsson, Gustav & Petersen, Bruce C., 2012. "Do financing constraints matter for R&D?," European Economic Review, Elsevier, vol. 56(8), pages 1512-1529.
    10. Juan R. Perilla Jiménez & Thomas H. W. Ziesemer, 2024. "Technology adoption, innovation policy and catching-up," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-24, April.
    11. Benavente, Jose Miguel & Zuniga, Pluvia, 2021. "How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms," MERIT Working Papers 2021-024, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Francesco Aiello & Graziella Bonanno & Stefania Patrizia Sonia Rossi, 2019. "Risk Aversion And Entrepreneurship: Financing Innovation For Smes Across Europe. Evidence From Multilevel Models," Working Papers 201902, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    13. Leontitsis, Alexandros & Philippas, Dionisis & Sickles, Robin C. & Tziogkidis, Panagiotis, 2018. "Evaluating countries’ innovation potential: an international perspective," Working Papers 18-011, Rice University, Department of Economics.
    14. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    15. Andreas Teichgraeber & John Van Reenen, 2022. "A policy toolkit to increase research and innovation in the European Union," POID Working Papers 025, Centre for Economic Performance, LSE.
    16. Giebel, Marek & Kraft, Kornelius, 2020. "Bank credit supply and firm innovation behavior in the financial crisis," Journal of Banking & Finance, Elsevier, vol. 121(C).
    17. Geziel Fernandez Tuesta & Esteban Fernandez Tuesta & Luciano Antônio Digiampietri & Dominik Hartmann, 2025. "The diversity and (dis-)similarity of Brazilian universities’ research portfolios," Scientometrics, Springer;Akadémiai Kiadó, vol. 130(1), pages 237-266, January.
    18. Juan Ricardo Perilla Jimenez, 2019. "Mainstream and evolutionary views of technology, economic growth and catching up," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 823-852, July.
    19. Fryges, Helmut & Kohn, Karsten & Ullrich, Katrin, 2011. "The Interdependence of R&D Activity and Debt Financing of Young Firms," IZA Discussion Papers 6217, Institute of Labor Economics (IZA).
    20. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 43, September.

    More about this item

    Keywords

    Portfolio approach; Merit-based funding; Conventions;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • H0 - Public Economics - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:54:y:2025:i:1:s0048733324001781. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/respol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.