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The Effects of Prize Structures on Innovative Performance

Author

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  • Joshua Graff Zivin
  • Elizabeth Lyons

Abstract

Successful innovation is essential for the survival and growth of organizations but how best to incentivize innovation is poorly understood. We compare how two common incentive schemes affect innovative performance in a field experiment run in partnership with a large life sciences company. We find that a winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation, but shared across the ten best innovations. Moreover, we find that the elasticity of creativity with respect to compensation schemes is much larger for teams than individual innovators.

Suggested Citation

  • Joshua Graff Zivin & Elizabeth Lyons, 2020. "The Effects of Prize Structures on Innovative Performance," NBER Working Papers 26737, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26737
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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