The objective of this study was to discuss the variation in the competition-based allocation of public research funding (not R&D funding) to higher education institutions in European Union Member States as well as the causes and consequences of these differences. This study provided an overview about the national research funding systems in Member States, including the mechanisms of the allocation of resources. It demonstrated the differences in the competition-based allocation of funding, the specific ways quality is assessed and the international openness of the national research funding systems. The outcome of the study was an assessment of the factors seen as crucial for the differences in the level of competition-based allocation of funding in the identified Member States, and an assessment of the impact of the level of competition on the quality of research. The study drew analytical conclusions about the impact of the results for research and innovation policies and particularly for the European Research Area.