We all know that teaching is its own reward. Faculty do scholarly activity because that is the primary job at an educational institution that has a research mission. Faculty undertake scholarly activity because that is the reason most faculty obtained advanced degrees and their potential for continued scholarly activity was the main reason most were hired at a research university. Faculty are promoted and receive merit raises on the basis of their scholarly activity. Faculty seek extramural funding because that is the best way to fund their scholarly activity.
Administrators look favorably on faculty who obtain grants that bring overhead to the institution.
In this respect, not all grants are created equal. National or federal grants are much more valuable than are puny local or foundation grants. Faculty are rewarded handsomely for their success in bringing grant dollars to the institution. A few Faculty undertake many other activities. Some mentor undergraduate research projects.