In 2001, the Texas state legislature created the Texas Excellence Fund (TEF) and the University Research Fund (URF) with the purpose of supporting institutional excellence and research capacity at general academic institutions. During the 2002-2003 biennium, participating Texas public universities received revenues from these funds (Legislative Budget Board [LBB] Staff, 2002). However, for the 2004-2005 biennium, Texas Governor Rick Perry vetoed appropriations for both funds (State of Texas, 2003). In 2005, as a replacement to the TEF and the URF, the Research Development Fund (RDF) was established to promote increased research capacity at eligible general academic institutions (Texas Education Code, Chapter 62.091, 2005). The purpose of this study was to examine the impact the RDF may have had in improving the research capacity of participating universities by examining the change in external sources in relationship to the change in the level of RDF resources. In addition, the study examined the relationship between changes in external resources and selected institutional characteristics. For purposes of this study, the state incentive funds, TEF, URF, and RDF were referred to as RDF since it is the latest designation and has the same purpose of all previous funds. (Contains 1 table and 1 figure.)