The impact of innovation inducement prizes

Innovation inducement prizes are among the oldest types of innovation policy measures. The popularity of innovation inducement prizes gradually decreased during the early twentieth century. However, innovation inducement prizes have regained some of their popularity since the 1990s, especially in the US and UK. Despite the growing popularity of innovation inducement prizes, the impact of this innovation policy measure is still not understood. This chapter brings together the existing evidence on the effects of innovation inducement prizes by drawing on a number of ex-ante and ex-post evaluations as well as limited academic literature. As well as developing the particular technology that the innovation inducement prizes produce, they create prestige for both the prize sponsor and entrants. Prizes might also increase public and sectoral awareness on specific technology issues. Design issues are the main concern of the prizes literature. A number of studies point out that sometimes prizes should be accompanied or followed by other demand-side initiatives to fulfil their objectives, mostly on the basis of ex-ante evaluations. Finally, prizes are seen as a valuable opportunity for experimentation in innovation policy. Prizes can overcome some of the inherent barriers to other instruments, but if prizes are poorly designed, managed and awarded they may be ineffective or even harmful.