The financing of agricultural research presents a unique policy problem. While research is often funded by national or subnational governments, the benefits of research often spill across the boundaries of the government financing the research. Many observers of international agricultural research have noted that the spillover problem exists and that policy changes are needed if an internationally optimal level of investment in research is to be provided (Judd, et al., 1987; Idachaba, 1981; Ruttan, 1987b). Some empirical studies have attempted to measure international benefit spillovers (Evenson, 1977; Davis, et al., 1987; Edwards and Freebairn 1984), and others have attempted to establish criteria for allocating research resources (ldachaba, 1989, p. 6; Paz, 1981; Norton and Pardey, 1987; Fishel, 1971; de Castro and Schuh, 1977; Carter, 1985). None of these studies has addressed two central policy questions: what policy tools are available for achieving an optimal level of investment in research and what institutional innovations are required to make these policy tools operable? This paper uses public finance theory to address these questions. First, the sources of international benefit spillovers will be examined. Second, public finance theory will be used to examine the policy tools available for achieving institutional coordination in financing research. Third, empirical estimates of international benefit spillovers will be reviewed. Finally, the policy implications of this research will be examined, with special emphasis on the institutional innovations needed to finance an optimal level of agricultural research.