Higher education and research institutions are confronted with changing and sometimes contradictory claims from state, industry and society, today. They have to face growing volatility and an acceleration and internationalization of the knowledge process. This book undertakes to develop a sector specific theory of governance of the public research sector and applies it to the German research system. The book is the outcome of a large interdisciplinary project. It analyzes the reforms in the German research system from an integrated perspective of law, economics and social sciences. The case of Germany is compared to reforms in other European countries such as Austria, the Netherlands and the United Kingdom. The study emphasizes an integrated approach considering the research function of universities as well as the non-university research sector. The focus is on the integration of external and internal governance. First, we pose the question how external competition and control mechanisms do influence internal governance of research institutions and universities and vice versa. Second, we discuss the consequences of these impacts on research.