Public research institutions (PRIs) are tasked with generating new knowledge, as well as adding value to existing knowledge in order to come up with innovations that can contribute to national competitiveness. To this end, government provides discretionary or parliamentary grants to allow the public research institutions to execute their mandates by carrying out exploratory activities and exploitative activities in research and development.The study aimed to establish the role of the parliamentary grant in supporting the research and development endeavours of a public research institute, with a particular focus on the management of exploration and exploitation tensions in investing the parliamentary grant. The sustainability of the PRI was sus assessed using operating profits as a proxy. The relationships between levels of investment in exploratory and exploitative actives were assessed, as was the role of the innovation system in influencing the sustainability of the PRI. We use the Council for Scientific and Industrial Research (CSIR) the largest scientific research entity in South Africa, and its operational units as a case study.Consistent with information that is available in the literature, the data from this study shows that the discretionary grant plays a critical role as a funding stream for public research institutes, contributing to the effective execution of research and development activities of the entity. The discretionary grant is key in seeding new national competencies, and is a key initial investment in enabling the PRI to establish itself, generate outputs and outcomes that herald its competencies and thus position itself to earn other forms of income.The discretionary grant is invested for exploratory and exploitive activities. Exploratory activities generate new knowledge, which is necessary for competitiveness. Exploitative activities utilise existing knowledge to provide innovations that find utility in industries and the public sector. The manner in which the investment is split between exploration and exploitation was shown to be critical to the long term sustainability of the enterprise. Skewing investment in either exploration or exploitation alone is detrimental to sustainability.The optimal split of the discretionary grant between exploration and exploitation was found to be dependent on several factors, to include, the technology bases of the industries in which the entity operates and the connectivity and paths of knowledge flow in the innovation systems nationally and globally.Inability to earn other forms of income is in itself a threat to the long term sustainability, particularly in fiscally constrained environments that are typical of emerging economies. The ability to earn external income provides options for investment of the PG in building its capability base. Notable here is the fact that the absorptive capacity of the industry sector in the first place, the innovation system in which the entity operates and the connectedness of the entity within the system appear to have important influences on ability to earn other forms of income. In such cases, strategic decisions have to be made on whether the sector remains strategic enough for the country in deciding on continued investment.While the information derived from this study is very specific to the CSIR, a combination of the data and information in the literature provides insights that are applicable to other public research institutes, particularly in developing economies.