A major source of research funding for individual university professors are competitive research grants. With focus on Luxembourg, we present results from a difference-in-difference analysis which show that research grants by the Luxembourg National Research Fund (FNR), the central research funding agency in Luxembourg, increase the scientific output of university professors by 31%. We further show that the scientific output drops again around five years after the grant receipt. We, however, find that those university professors who realize a quality increase of their journal publications in the years following the receipt of the grant benefit from a long-lasting quality effect.