Do Competititions & Prizes Increase Innovation?

Our buddy BrianH over at Schumpeter’s Century pointed us to an article in BusinessWeek investigating the usefulness of big money prizes, such as the X Prize, in spurring innovation.

This blog looks into the value and typology of business plan competitions that exist out there. We often wonder whether these a) are good teaching tools b) are good business planning tools and c) whether they are useful policy tools for economic growth, innovation, and education. These goals are a bit different from contests like the X prize, but similar enough to warrant investigation.

I often wonder of these are American constructs or these are human constructs. The love of competition and recognition for greatness and success?

From the BusinessWeek article by Steve LeVine,

These days, patrons are knocking on Diamandis’ door. “I don’t make the claim that incentive prizes are a panacea,” he says. But he adds that there are hundreds of billionaires on the planet. “There will come a time when you can only name so many buildings,” he says. “I won’t be surprised if over the next decade we see $100 million or $1 billion megaprizes to solve big problems. We are genetically bred to compete.”

Although his name is most associated with scientific contests today, Diamandis isn’t the first to see that money can be a powerful motivator. Prizes to determine how to measure longitude were around for 200 years before British clockmaker John Harrison solved the mystery in 1761. More recently, contests helped begin the canning industry, accelerate progress in the automotive industry, and produce the first computer to beat a chess grandmaster (Garry Kasparov in 1996). In the 20th century, government grants and corporate R&D budgets became the favored way to fund scientific advances, with contests almost dying out until Diamandis came along.

But can prize money do more than existing incentives?

The notion that wealthy philanthropists will back these contest is a pretty novel notion, especially given the research that Zoltan Acs is currently engaged in regarding the role of philanthropists in increasing opportunity in the American capitalist system.

BTW, after reading about the founder (Peter Diamandis) I wonder how does he and his organization fit into our developing notions of social entrepreneurship. Its clear that Diamandis is an entrepreneur — but is commercial space travel an important and scalable social goal? I am sure that I am not aware of the practical uses of commercialized space travel, as opposed to my assumption that it is space toursim for the Super Rich. Are we going to start sending our trash into space in order to green the planet? Will we grow food in space and then ship it back to the earth? (not good for the locally grown movement, I’d imagine or the farmers in Iowa)

The X Foundation has some more contests coming up including a few in the transportation, alternative fuel, and energy space.

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