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Funding agencies use a variety of mechanisms to fund research. The National Institutes of Health in the United States, for example, employs scientists to perform research at its own laboratories (intramural research), and it also awards grants to pay for research at external institutions such as universities (extramural research). Here, using data from 1594 intramural grants and 97054 extramural grants funded between 2009 and 2019, we compare the scholarly outputs from these two funding mechanisms in terms of number of publications, relative citation ratio and clinical metrics. We find that extramural awards more cost-effectively fund outputs commonly used for academic review such as number of publications and citations per dollar, while intramural awards are more cost-effective at generating work that influences future clinical work, more closely in line with agency health goals. These findings provide evidence that institutional incentives associated with different funding mechanisms drive their comparative strengths.