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


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


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.

Suggested Citation

  • Murray, Fiona & Stern, Scott & Campbell, Georgina & MacCormack, Alan, 2012. "Grand Innovation Prizes: A theoretical, normative, and empirical evaluation," Research Policy, Elsevier, vol. 41(10), pages 1779-1792.
  • Handle: RePEc:eee:respol:v:41:y:2012:i:10:p:1779-1792 DOI: 10.1016/j.respol.2012.06.013

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    References listed on IDEAS

    1. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters,in: Innovation Policy and the Economy, Volume 2, pages 51-78 National Bureau of Economic Research, Inc.
    2. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87 World Scientific Publishing Co. Pte. Ltd..
    3. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    4. Hurwicz, Leonid, 1973. "The Design of Mechanisms for Resource Allocation," American Economic Review, American Economic Association, vol. 63(2), pages 1-30, May.
    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, June.
    6. Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
    7. Shavell, Steven & van Ypersele, Tanguy, 2001. "Rewards versus Intellectual Property Rights," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 525-547, October.
    8. 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.
    9. 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.
    10. Gandal, Neil & Scotchmer, Suzanne, 1993. "Coordinating research through research joint ventures," Journal of Public Economics, Elsevier, vol. 51(2), pages 173-193, June.
    11. Michael Kremer, 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1137-1167.
    12. Brunt, Liam & Lerner, Josh & Nicholas, Tom, 2008. "Inducement Prizes and Innovation," CEPR Discussion Papers 6917, C.E.P.R. Discussion Papers.
    13. 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.
    14. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
    15. 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.
    16. Ron Siegel, 2009. "All-Pay Contests," Econometrica, Econometric Society, vol. 77(1), pages 71-92, January.
    17. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
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    Cited by:

    1. repec:wsi:ijimxx:v:21:y:2017:i:05:n:s1363919617400060 is not listed on IDEAS
    2. B. Zorina Khan, 2014. "Of Time and Space: Technological Spillovers among Patents and Unpatented Innovations during Early U.S. Industrialization," NBER Working Papers 20732, National Bureau of Economic Research, Inc.
    3. Galasso, Alberto & Mitchell, Matthew & Virag, Gabor, 2016. "Market outcomes and dynamic patent buyouts," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 207-243.
    4. repec:eee:respol:v:47:y:2018:i:2:p:343-362 is not listed on IDEAS
    5. repec:eee:exehis:v:64:y:2017:i:c:p:21-36 is not listed on IDEAS
    6. Brueggemann, Julia & Meub, Lukas, 2015. "Experimental evidence on the effects of innovation contests," Center for European, Governance and Economic Development Research Discussion Papers 251, University of Goettingen, Department of Economics.
    7. Kevin J. Boudreau & Karim R. Lakhani, 2015. "Innovation Experiments: Researching Technical Advance, Knowledge Production, and the Design of Supporting Institutions," NBER Chapters,in: Innovation Policy and the Economy, Volume 16 National Bureau of Economic Research, Inc.
    8. B. Zorina Khan, 2017. "Prestige and Profit: The Royal Society of Arts and Incentives for Innovation, 1750-1850," NBER Working Papers 23042, National Bureau of Economic Research, Inc.
    9. repec:eee:iepoli:v:39:y:2017:i:c:p:72-83 is not listed on IDEAS
    10. repec:eee:tefoso:v:127:y:2018:i:c:p:57-69 is not listed on IDEAS

    More about this item


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


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