The Swedish system of research funding has undergone major changes, while competitive funding schemes gradually have gained popularity, at the expense of institutional block grants. In recent years, there has been a strong drive to improve research performance in universities as a result of governmental desires, resulting in performance-based research funding systems (PRFS) being introduced to distribute block grants. The study on which this article reports sought to understand the development of increased government intent to steer resources for research, by investigating the behaviour of universities and university colleges in Sweden in terms of internal organisation and distribution of funding. The article investigates the structure of and motives for applying PRFS at seven new universities and university colleges through a document and interview study. We identified three categories of higher education institutions: the excellence seekers, the pragmatists and the sceptics. Universities rhetorically ignal compliance with governmental propositions to distribute funding according to performance measures, but their actions are limited. Thus, national incentives, models and measures influence decisions at lower institutional levels in a rather modest way.