The impact of innovation inducement prizes

This paper is part of the Compendium of Evidence on the Effectiveness of Innovation Policy Intervention. This report 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. Innovation inducement prizes have a wide range of rationales and there is no agreed on dominant rationale in the literature. It is evident from the literature we analysed that the evidence on the impact of innovation inducement prizes is scarce. There are only a few evaluations or academic works that deal with the creation of innovation output and even those which deal with the innovation output only rarely deals with the additionality. Only a very limited number of studies looked at if innovation inducement prizes led to more innovation itself or innovation outputs. There is also a consensus that innovation inducement prizes are not a substitute for other innovation policy measures but are complementary under certain conditions. Prizes can be effective in creating innovation through more intense competition, engagement of wide variety of actors, distributing risks to many participants and by exploiting more flexible solutions through a less prescriptive nature of the definition of the problem in prizes. They 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.