Allocating public R&D funding: Do competitively-selected projects outperform politically-selected ones?

Studies on public R&D funding tend to assume that competitive selection processes lead to a better allocation of R&D in comparison to more political selection processes. In this paper, we test  this assumption by examining the outcomes of 322 R&D projects from the U.S. Department of Energy’s Hydrogen Program. In this particular program, projects could not only be selected through a competitive selection process, but also could receive funding via a more political alternative – i.e. being earmarked by a U.S. congressional representative. We find that, whereas earmarked projects receive considerably lower peer review evaluation scores than non-earmarked projects, they do not underperform in terms of tangible research outcomes (i.e. patents and publications). Post-hoc analyses also suggest the existence of a negative bias of project reviewers toward earmarked projects. Based on these findings, we challenge the assumed superiority of competitively selection processes for allocation of public R&D funding. Moreover, we contribute to the ongoing policy debate on the advantages and liabilities of earmarks.