Article | Journal of Industrial Economics | December 2012

Inducement Prizes and Innovation

by Liam Brunt, Josh Lerner and Tom Nicholas

Abstract

We examine the effect of prizes on innovation using data on awards for technological development offered by the Royal Agricultural Society of England at annual competitions between 1839 and 1939. We find that the effects of prizes on competitive entry are large, and we also detect an impact of the prizes on the quality of contemporaneous patents, especially when prize categories were set by a strict rotation scheme, thereby mitigating the potentially confounding effect that they targeted only "hot" technology sectors. Prizes encouraged competition and medals were more important than monetary awards. The boost to innovation we observe cannot be explained by the redirection of existing inventive activity.

Keywords: Motivation and Incentives; Patents; Innovation and Invention; Technology; Growth and Development; England;

Citation:

Brunt, Liam, Josh Lerner, and Tom Nicholas. "Inducement Prizes and Innovation." Journal of Industrial Economics 60, no. 4 (December 2012): 657–696.