The Effects of Prize Structures on Innovative Performance

33 Pages Posted: 11 Feb 2020 Last revised: 23 Jul 2021

See all articles by Joshua Graff Zivin

Joshua Graff Zivin

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Elizabeth Lyons

University of California, San Diego (UCSD)

Date Written: February 2020

Abstract

Successful innovation is essential for the survival and growth of organizations but how best to incentivize innovation is poorly understood. We compare how two common incentive schemes affect innovative performance in a field experiment run in partnership with a large life sciences company. We find that a winner-takes-all compensation scheme generates significantly more novel innovation relative to a compensation scheme that offers the same total compensation, but shared across the ten best innovations. Moreover, we find that the elasticity of creativity with respect to compensation schemes is much larger for teams than individual innovators.

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Suggested Citation

Graff Zivin, Joshua and Lyons, Elizabeth, The Effects of Prize Structures on Innovative Performance (February 2020). NBER Working Paper No. w26737, Available at SSRN: https://ssrn.com/abstract=3535327

Joshua Graff Zivin (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States

National Bureau of Economic Research (NBER)

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Elizabeth Lyons

University of California, San Diego (UCSD) ( email )

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Mail Code 0502
La Jolla, CA 92093-0112
United States

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