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Grand Innovation Prizes: A theoretical, normative, and empirical evaluation

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  • Murray, Fiona
  • Stern, Scott
  • Campbell, Georgina
  • MacCormack, Alan
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    Abstract

    This paper provides a systematic examination of the use of a Grand Innovation Prize (GIP) in action – the Progressive Automotive Insurance X PRIZE – a $10 million prize for a highly efficient vehicle. Following a mechanism design approach we define three key dimensions for GIP evaluation: objectives, design, and performance, where prize design includes ex ante specifications, ex ante incentives, qualification rules, and award governance. Within this framework we compare observations of GIPs from three domains – empirical reality, theory, and policy – to better understand their function as an incentive mechanism for encouraging new solutions to large-scale social challenges. Combining data from direct observation, personal interviews, and surveys, together with analysis of extant theory and policy documents on GIPs, our results highlight three points of divergence: first, over the complexity of defining prize specifications; secondly, over the nature and role of incentives, particularly patents; thirdly, the overlooked challenges associated with prize governance. Our approach identifies a clear roadmap for future theory and policy around GIPs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Research Policy.

    Volume (Year): 41 (2012)
    Issue (Month): 10 ()
    Pages: 1779-1792

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    Handle: RePEc:eee:respol:v:41:y:2012:i:10:p:1779-1792

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    Web page: http://www.elsevier.com/locate/respol

    Related research

    Keywords: Innovation; X PRIZE; Incentive; Energy; Competition; Challenge;

    References

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    1. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
    2. Steven Shavell & Tanguy van Ypersele, 1999. "Rewards versus Intellectual Property Rights," NBER Working Papers 6956, National Bureau of Economic Research, Inc.
    3. Gandal, Neil & Scotchmer, Suzanne, 1993. "Coordinating research through research joint ventures," Journal of Public Economics, Elsevier, vol. 51(2), pages 173-193, June.
    4. Nancy Gallini & Suzanne Scotchmer, 2003. "Intellectual Property: When is it the Best Incentive System?," Levine's Working Paper Archive 618897000000000532, David K. Levine.
    5. Douglas J. Besharov & Heidi Williams, 2012. "Innovation Inducement Prizes: Connecting Research to Policy," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 31(3), pages 752-776, 06.
    6. Gerard Llobet & Hugo Hopenhayn & Matthew F. Mitchell, 2000. "Rewarding sequential innovators: prizes, patents and buyouts," Staff Report 273, Federal Reserve Bank of Minneapolis.
    7. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
    8. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, 01.
    9. Brunt, Liam & Lerner, Josh & Nicholas, Tom, 2008. "Inducement Prizes and Innovation," CEPR Discussion Papers 6917, C.E.P.R. Discussion Papers.
    10. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    11. Kevin J. Boudreau & Nicola Lacetera & Karim R. Lakhani, 2011. "Incentives and Problem Uncertainty in Innovation Contests: An Empirical Analysis," Management Science, INFORMS, vol. 57(5), pages 843-863, May.
    12. Michael Kremer & Heidi Williams, 2010. "Incentivizing Innovation: Adding to the Tool Kit," NBER Chapters, in: Innovation Policy and the Economy, Volume 10, pages 1-17 National Bureau of Economic Research, Inc.
    13. Hurwicz, Leonid, 1973. "The Design of Mechanisms for Resource Allocation," American Economic Review, American Economic Association, vol. 63(2), pages 1-30, May.
    14. Teece, David J., 1993. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," Research Policy, Elsevier, vol. 22(2), pages 112-113, April.
    15. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
    16. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    17. Alan MacCormack & Roberto Verganti & Marco Iansiti, 2001. "Developing Products on "Internet Time": The Anatomy of a Flexible Development Process," Management Science, INFORMS, vol. 47(1), pages 133-150, January.
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