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Competitive funds (CF) have become a preferred mechanism to allocate research funding, particularly in developing countries, to the point that they are the most important (and often unique) source of funds. Most analysis of CF assumes that they are an efficient instrument to allocate research funds, without realizing that other allocation mechanisms are available. The funding agency only has limited knowledge about the effectiveness of CF. This paper reviews the experience of the Mexican Produce Foundations with CF in the agriculture sector and discusses some benefits and limits of using CF as the main mechanism to fund research in a country with a relatively weak national innovation system, a relatively small research system, and some very innovative actors in the agricultural system.
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