The world’s third largest producer of scientific research, Germany, is the origin of the research university and the independent, extra-university research institute. Its dual-pillar research policy differentiates these organizational forms functionally: universities specialize in advanced research-based teaching; institutes specialize intensely on research. Over the past decades this policy affected each sector differently: while universities suffered a lingering “legitimation crisis,” institutes enjoyed deepening “favored sponsorship”—financial and reputational advantages. Universities led the nation’s reestablishment of scientific prominence among the highly competitive European and global science systems after WWII. But sectoral analysis of contributions to science, technology, engineering, mathematics, and medical and health journal publications (1950–2010) finds that Germany’s small to medium-sized independent research institutes have made significant, growing contributions, particularly in publishing in higher impact journals proportionally more than their size. Simultaneously—despite dual-pillar policy implications—the university sector continues to be absolutely and relatively successful; not eclipsed by the institutes. Universities have consistently produced two-thirds of the nation’s publications in the highest quality journals since at least 1980 and have increased publications at a logarithmic rate; higher than the international mean. Indeed, they led Germany into the global mega-science style of production. Contrary to assumed benefits of functional differentiation, our results indicate that relative to their size, each sector has produced approximately similar publication records. While institutes have succeeded, the larger university sector, despite much less funding growth, has remained fundamental to German science production. Considering these findings, we discuss the future utility of the dual-pillar policy.