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

  • Murray, Fiona
  • Stern, Scott
  • Campbell, Georgina
  • MacCormack, Alan
Registered author(s):

    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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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/respol

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    1. 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.
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    5. 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.
    6. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    7. Steven Shavell & Tanguy van Ypersele, 1999. "Rewards versus Intellectual Property Rights," NBER Working Papers 6956, National Bureau of Economic Research, Inc.
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    9. 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.
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    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. 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.
    13. Gallini, Nancy & Scotchmer, Suzanne, 2001. "Intellectual Property: When Is It the Best Incentive System?," Department of Economics, Working Paper Series qt9wx2c2hz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    17. Newell, Richard & Wilson, Nathan, 2005. "Technology Prizes for Climate Change Mitigation," Discussion Papers dp-05-33, Resources For the Future.
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