Azoulay, Pierre, and Danielle Li (eds), ‘Scientific Grant Funding’, Innovation and Public Policy (Chicago, IL, 2022; online edn, Chicago Scholarship Online, 22 Sept. 2022), https://doi.org/10.7208/chicago/9780226805597.003.0005, accessed 13 Dec. 2023.

1. Role of Grants in Research-Funding Ecosystem: Grants are essential in supporting exploratory research, particularly effective when the research is likely to have significant spillovers across domains and over time. They complement other funding mechanisms like patents, prizes, and research contracts, especially in early-stage scientific research.
2. Design and Risk-Taking in Grant Programs: Grant programs should be designed to encourage risk-taking and exploration of new research avenues. This fosters innovation and breakthroughs by supporting projects that may not follow conventional research paths.
3. Systematic Evaluation of Grant Programs Explained:

• The idea is to assess the effectiveness of grants by comparing outcomes of funded and non-funded entities (scientists, institutions, fields).
• This could involve tracking the progress and breakthroughs of researchers who received grants against those who didn’t, offering insights into the real impact of grant funding.

1. Comparative Analysis of Funding Mechanisms:

• Grants:
  • Pros: Support uncertain R&D, no repayment if project fails, encourage exploratory research.
  • Cons: Risk of funding unsuccessful projects, potential inefficiency in allocation.
• Loans:
  • Pros: Recoupable, can incentivize efficient use of funds.
  • Cons: Risk aversion, repayment pressure may deter high-risk projects.
• Equity Investments:
  • Pros: Aligns interests of investor and researcher, potential for high returns.
  • Cons: Dilution of ownership, pressure for market-oriented results.
• Prizes:
  • Pros: Awarded only for successful outcomes, can stimulate competition.
  • Cons: Need predefined success metrics, may not suit exploratory research.
• Patents:
  • Pros: Provide market exclusivity, incentivize R&D investments.
  • Cons: Can lead to market distortions, not suitable for steering research direction.

1. Challenges in Grant Systems: Issues include inefficiency due to unfunded proposals, bias in grantsmanship skills, and potential for peer review to filter out novel ideas. These challenges call for a more equitable and effective evaluation process.
2. Portfolio Approach in Funding with Example:

• A single $1 million project might have a 0.00001% chance of a major breakthrough like curing cancer. This represents a high risk for any individual investment.
• However, funding 200,000 such projects (totaling $200 billion) increases the collective chance of success to 87%. This illustrates the importance of viewing funding as a broad social portfolio, where the aggregate risk is significantly lower and the potential for a major breakthrough becomes substantial.

1. Decision-making in Funders and Trade-Offs:

• Funders must choose research domains and stages in the value chain, balancing risk and opportunity.
• The choice between funding unexplored “white spaces” and established areas involves trade-offs. White spaces offer new opportunities but are risky, while established areas might lead to duplication and “priority races.”

1. Evolving Grant Funding Practices and Principles:
   • Avoiding a short-term focus is crucial, as it can undermine long-term scientific exploration.
   • Maintaining diverse approaches in grant making is essential, including identifying gaps in funding, especially regarding risk orientation.
   • Rigorous evaluation of grant administration is vital, adopting an experimental mindset for more effective innovation support.