The objective of this paper is to present econometric evidence of the effects of economic incentives and institutions on national aggregate private agricultural R&D investments. An econometric model of national aggregate annual private R&D investment is specified and fitted to panel data consisting of seven EU countries (Austria, Germany, Italy, The Netherlands, Portugal, Spain and Sweden) over 1984-1995. We find strong impacts of both incentives and institutions on private agricultural R&D investment. Including institutional factors strengthens the story and in some cases greatly changes the results. © 2001 Elsevier Science B.V. All rights reserved.