centER Discussion Paper Series No. 2009-33
38 Pages Posted: 27 Jun 2008 Last revised: 29 Sep 2013
Date Written: February 22, 2010
The process of innovation is driven by two main factors: new inventions and institutions supporting the transformation of inventions into marketable innovations. This paper proposes a new institution, called a semi-public competition, that has been neglected by the economic literature but exists frequently in practice. I show how semi-public competitions can mitigate a dilemma that arises at an early stage of innovative activity and specify the conditions under which a semi-public competition can increase welfare. The results suggest that governments promote knowledge about the semi-public competition mechanism but refrain from direct public funding of competitions.
Keywords: Innovation, Organized Competitions, Entrepreneurs, Institutional Design, Business Plan Competitions, Auctions
JEL Classification: D02, D86, L10, O31
Suggested Citation: Suggested Citation