Innovation is a critical part of tackling problems in areas as diverse as transportation, housing, public health and energy. But the scientists, inventors and entrepreneurs who might generate creative solutions often investigate issues or pursue economic opportunities in other less urgent fields. Incentives for science and innovation try to steer efforts toward the most pressing societal problems.
Prizes – cash rewards for scientific, engineering and other achievements – are one form of incentive that has been around for a very long time. In the 18th century, for example, organizations such as the Royal Society in the U.K. awarded medals to scientists for their breakthrough research.
Today, in addition to this type of scientific award, there are also prizes for solutions to diverse problems including the invention of new transportation means for disabled people, the engineering of new battery recycling methods, and even the development of technologies to treat COVID-19 patients. There are also “open innovation” websites, such as InnoCentive, that companies use to source ideas and inventions from thousands of problem solvers in exchange for prizes.
All these prizes seek to focus creativity and investment by attracting the smartest and most creative people who, with the right incentive, might focus on the highlighted problem and in turn come up with amazing breakthroughs. Researchers like me work to determine how effective these prizes really are as drivers of innovation.
Reward past achievements, motivate future breakthroughs
There are two main types of prizes. Scientific awards, which include both historic medal awards and the more recent Nobel Prizes, for example, are a retrospective recognition for outstanding contributions to science rather than an incentive to embark on one specific line of inquiry. To award them, every year, a number of judges examine the achievements of the nominees and pick winners.
Grand prizes, in contrast, offer rewards to the first participant who achieves a particular feat that is of interest to the prize organizer. For example, in the 1990s, the Ansari X Prize offered US$10 million for the first private manned spacecraft that went to space twice within two weeks. Participants had to meet these specific criteria to be able to claim the prize, which ultimately sought to promote space tourism. Generally, this type of prize names a single winner who takes home all the prize money. But sometimes there are smaller second and third prizes too.
Thanks to the Ansari X Prize and other popular competitions like the $30 million Google Lunar X Prize for Moon exploration and the $5 million DARPA Grand Challenges for the development of autonomous vehicles (all case studies that I investigated), companies, governments and nonprofit organizations began using prizes more actively and, with help from the internet, made them more popular and exciting.
Analyzing prizes’ effects on innovation
When I started researching