Inducement Prizes and Innovation

Brunt, Liam; Lerner, Josh; Nicholas, Tom

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Inducement Prizes and Innovation

CEPR Discussion Paper No. DP6917

56 Pages Posted: 2 Dec 2008

See all articles by Liam Brunt

Liam Brunt

NHH - Norwegian School of Economics; Centre for Economic Policy Research (CEPR)

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

Tom Nicholas

Harvard University - Entrepreneurial Management Unit

There are 2 versions of this paper

Date Written: July 2008

Abstract

We examine prizes as an inducement for innovation using a novel dataset of awards for inventiveness offered by the Royal Agricultural Society of England from 1839 to 1939. At annual shows the RASE held competitive trials and awarded medals and monetary prizes (exceeding one million pounds in current prices) to spur technological development. We find large effects of the prizes on contest entries, especially for the Society's gold medal. Matching award and patent data, we also detect large effects of the prizes on the quality of contemporaneous inventions. These results hold even during the period when prize categories were determined by a strict rotation scheme, thus overcoming the potential confounding effect that awards may have targeted "hot" technology sectors. Our evidence suggests that prize awards can be a powerful mechanism for encouraging competition and that prestigious non-pecuniary prizes can be a particularly effective inducement for innovation.

Keywords: awards, contests, patents

JEL Classification: N40, O30, O31

Suggested Citation: Suggested Citation

Brunt, Liam and Lerner, Josh and Nicholas, Tom, Inducement Prizes and Innovation (July 2008). CEPR Discussion Paper No. DP6917, Available at SSRN: https://ssrn.com/abstract=1307507