Less Money = More Interesting Research?

An interesting, dissident blog entry from 'Science Punk' Frank Swain. Whilst making a Radio 4 documentary he interviewed Jaroslav Flegr, a Czech academic who claimed that 'the relatively meagre funding available [to his research team] had led them to study areas overlooked by bigger institutions. If more money had been available, he said, there would have been a pressure to design complex experiments in order to justify (and receive) large grants.'

An interesting idea. Frank asks for the thoughts of others. The comments that follow seem to (generally) concur. 'Jim', the third person to comment, suggests that 'I can think of any number of labs in my field that feel the need to 'sex up' their research proposals with fancy equipment, and also look (often in a rather contrived manner) for international collaborators and other tick boxes that make for sexy applications.'

Taken to its natural conclusion, might it be seen that research funding (or rather, the way it's distributed and the unintended consequences that lead on from this) is actually bad for research?

What are your views? Is there truth in this, or is he barking up the wrong tree? Do go on to his blog and add your thoughts.