IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/11860.html

A Theory of Grand Innovation Prizes

Author

Listed:
  • Galasso, Alberto
  • Virag, Gabor
  • Mitchell, Matthew

Abstract

The past decade has witnessed a resurgence in innovation awards, in particular of Grand Innovation Prizes (GIPs) which are rewards to innovators developing technologies reaching performance goals and requiring breakthrough solutions. GIPs typically do not preclude the winner also obtaining patent rights. This is in stark contrast with mainstream economics of innovation theories where prizes and patents are substitute ways to generate revenue and encourage innovation. Building on the management of innovation literature which stresses the difficulty to specify ex-ante all the technical features of the winning technologies, we develop a model in which innovative effort is multi-dimensional and only a subset of innovation tasks can be measured and contracted upon. We show that in this environment patent rights and cash rewards are complements, and that GIPs are often preferable to patent races or prizes requiring technologies to be placed in the public domain. Moreover, our model uncovers a tendency for patent races to encourage speed of discovery over quality of innovation, which can be corrected by GIPs. We explore robustness to endogenous entry, costly public funds, and incomplete information by GIP organizers on the surplus created by the technology.

Suggested Citation

  • Galasso, Alberto & Virag, Gabor & Mitchell, Matthew, 2017. "A Theory of Grand Innovation Prizes," CEPR Discussion Papers 11860, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11860
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP11860
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Li, Yunjian & Chen, Jiawen & Li, Li & Huang, Xiaojun, 2024. "Government innovation awards, innovation funds acquisition and enterprise innovation," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 846-864.
    3. Galasso, Alberto, 2020. "Rewards versus intellectual property rights when commitment is limited," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 397-411.
    4. Laurent R Bergé & Thorsten Doherr & Katrin Hussinger, 2023. "How patent rights affect university science," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(3), pages 673-699.
    5. Rune Stenbacka & Mihkel Tombak, 2020. "University‐firm competition in basic research and university funding policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 1017-1040, August.
    6. Sands, Daniel B. & Sohn, Eunhee & Seamans, Robert, 2025. "Concept and creativity: Proof-of-concept demonstration and aviation innovation in the United States, 1894–1913," Research Policy, Elsevier, vol. 54(5).

    More about this item

    Keywords

    ;
    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.