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Experimental evidence on the effects of innovation contests

Julia Brüggemann and Lukas Meub

Information Economics and Policy, 2017, vol. 39, issue C, 72-83

Abstract: Economic research on innovation has long discussed which policy instruments best foster innovativeness in individuals and organizations. One of the instruments easily accessible to policy-makers is innovation contests; however, there is ambiguous empirical evidence concerning how such contests should be designed. Our experimental study provides evidence by analyzing the effects of two different innovation contests on subjects’ innovativeness: a prize for the cumulative innovativeness and a prize for the best innovation. We implement a creative real effort task simulating a sequential innovation process, whereby subjects determine royalty fees for their created products, which also serve as a measure of cooperation. We find that both contest conditions reduce the willingness to cooperate between subjects compared to a benchmark condition without an innovation contest. While both contests have similar effects, the most sophisticated innovation is significantly more valuable when there is a prize for the best innovation. However, the total innovation activity is not influenced by introducing innovation contest schemes. From a policy perspective, the implementation of state-subsidized innovation contests in addition to the existing intellectual property rights system should be questioned.

Keywords: Innovation prizes; Competition; Laboratory experiment; Real effort task; Creativity; Innovation policy (search for similar items in EconPapers)
JEL-codes: C91 D89 O31 (search for similar items in EconPapers)
Date: 2017
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