Technological Innovation and Prize Incentives
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Technological Innovation and Prize Incentives

The Google Lunar X Prize and Other Aerospace Competitions

Luciano Kay

In this in-depth study, Luciano Kay focuses on three recent cases of prize competitions in the aerospace industry: the Google Lunar X Prize, the Ansari X Prize and the Northrop Grumman Lunar Lander Challenge. Using a combination of real-time and historical analysis based on personal interviews, workplace visits and questionnaire and document data analysis, the author examines the particular dynamics of the prize phenomenon and offers a comprehensive discussion of the potential of prizes to induce innovation. This fascinating volume also sets out a systematic method to studying prize incentives, offering a concrete innovation model and case study design approach that will prove highly useful to further research efforts in the field.
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Chapter 3: Key questions and hypotheses

Luciano Kay


This investigation set out to examine the types of incentives offered by prizes and understand how different types of incentives weigh in the overall motivation of prize entrants. Findings in this regard are relevant for the design of successful prize competitions. To date most of our understanding of the motivations to participate in prizes has been based on the incentive provided by the monetary reward. In the scholarly literature the calculation of the appropriate prize reward has generally risen to the forefront but no accurate formula or algorithm has been provided to translate the theoretical concepts of private and social value of research and innovation into monetary amounts to determine prize rewards (Wright, 1983; Kremer, 1998; Shavell and van Ypersele, 1999; Abramowicz, 2003; Maurer and Scotchmer, 2004; Scotchmer, 2005; Wei, 2007). That is very important because theoretically, to induce R & D performers to pursue prizes rather than other options, rewards should reflect the social value of the inventions involved in the prize. Prize sponsors would prefer to pay only up to that amount if R & D costs were observable, but it is generally difficult for sponsors to observe and/or determine both the social value and the costs of R & D (not only for prizes but for other kinds of incentive mechanisms as well). Moreover, government and philanthropic sponsors are less likely to have information about the value of research and innovations than researchers and companies.

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