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Inducement Prizes and Innovation

56 Pages Posted: 2 Dec 2008  

Liam Brunt

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

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Tom Nicholas

Harvard University - Entrepreneurial Management Unit

Multiple version iconThere are 3 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

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

Liam Brunt (Contact Author)

NHH - Norwegian School of Economics ( email )

Department of Economics
Helleveien 30
N-5035 Bergen, Hordaland
Norway

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Josh Lerner

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tom Nicholas

Harvard University - Entrepreneurial Management Unit ( email )

Cambridge, MA 02163
United States

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