Does the concentration of scientific research funding in institutions promote knowledge output?

Basic research is the main powerhouse of a country's potential for continuous economic growth, and national-level scientific research funding is an important source of capital that supports this basic research. Given these observations, this paper takes micro-level data from projects funded by the Department of Management Sciences in the National Natural Science Foundation of China between 2006 and 2010 to examine the relationship between the efficient use of research funding and the level of concentrated funding in certain research institutions. In contrast to the positive externalities produced by the concentration of R&D activities, our study finds that the accumulation of scientific research funding at the institution level is negative correlated with the knowledge output of the principal investigators of projects within the research institution. We explore the sources of the negative correlation and discuss some policy implications.