Prizes, Patents, and Technology Procurement: A Proposed Analytical Framework
Resources for the Future Discussion Paper No. 11-21-REV
33 Pages Posted: 12 Jun 2011 Last revised: 10 Sep 2014
Date Written: December 21, 2012
Prizes are receiving increasing attention in policy and entrepreneurial communities as means to promote innovation, but their distinguishing features remain inadequately understood. Models of patents treat winning a patent as winning a prize; other models distinguish prizes primarily as public lump-sum (re)purchase of a patent. We examine advantages of prizes based on the ability to customize rewards, manage competition, generate publicity, and cover achievements otherwise not patentable. We propose a two-dimensional comparative framework based first on whether the procuring party knows its needs and technology, its needs but not its technology, or neither. The second dimension is the risk that the investment in research will prove profitable, where the greater the risk, the more the procuring party should share in it through ex ante cost coverage or payment commitment. Such a framework may be extended to cover other means of technology inducement, including grants, customized procurement, and off-the-shelf purchase.
Keywords: prizes, procurement, contracts, patents, public sector, technological change, innovation, productivity
JEL Classification: O31, D21, H41
Suggested Citation: Suggested Citation