How to Design Prizes - Incentives in Innovation Contests

This research paper focuses on the use of prizes in innovation contests as means to encourage participation and efforts in open innovation activities. Building on a systematic review of 69 innovation contests, we investigate differences in the design of prizes between innovation contests focusing on ideation and those with a development orientation. Results show a very heterogeneous picture, indicating a lack of target-oriented design of innovation contests and need for future research. 1 Innovation Contests Innovation contests have a long-standing tradition and have contributed to a lot of modern comforts. Early variants already took place in the beginning of the 18th century as a study by Masters and Delbecq [MD08], comprising of 89 innovation contests of the last 300 years, illustrates. Among the first are examples like the open call of the UK government to find a reliable way for locating the longitude at sea. John Harrison, the winner of this innovation contest, was granted prize money of £ 20,000, worth $ 2 million today [MD08]. Nowadays innovation contests left the realm of rulers and governments and are conducted by a wide array of organizers like companies, public organisations or even individuals. They are searching for easy design related ideas like tshirt or sport shoe designs [PW06] up to very complex solutions, e.g. algorithms or spacecrafts [MLD09]. Equally manifold are the used terms for this approach, i.e. idea competition, innovation challenge or (innovation) prize. Still, all the expressions share a common ground, (1) the emphasis on the means of competition to encourage participation and quality of submission [Ha48], (2) the focus on innovation or innovative ideas, as well as (3) the aspect of rewarding the best contributions by granting a prize. Thus, innovation contests can be defined as (web-based), time-limited “competitions of innovators who use their skills, experiences and creativity to provide a solution for a particular task” [BM10]. Contributions are then judged by a jury of experts and/or other participants in order to identify the best solution(s). Research has been conducted on the