Ian Currie + Associates provide research and analysis to support better public policies and business decisions.

This web site’s current research briefing is on government-led inducement prizes - what they are, what we know about them, and why they matter from a public policy perspective.

A.		What are inducement prizes…
B.		What do we know about government-led inducement prizes…				Images and Image Credits The European Commission’s €2 million Vaccine Challenge Prize is awarded in 2014 to CureVac GmbH. Image Credit: European Commission. Winners and organizers of NASA’s 2009 Centennial Challenge Prize. Image Credit: NASA In 2013 the Anglian Community Enterprise in Essex, UK, wins a £50,000 UK National Health Service Innovation Challenge prize. Image Credit: NHS Awards Ceremony Brochure
C.		Public conversation on inducement prizes…

A. What are inducement prizes?

Inducement prizes award a monetary prize in exchange for the completion of a pre-determined achievement and/or the answering of a pre-determined question. They are different from recognition prizes, such as the Nobel Prize, that are ex-post awards in recognition of a prior achievement.

Among the best known private and philanthropic inducement prizes over recent decades are those offered by the X Prize Foundation.  A growing number of private sector companies are offering their own inducement prizes to stimulate innovation. For example, Cisco’s I-Prize was launched in January 2010 to invite entrepreneurs worldwide to submit new business ideas in four categories: the future of work, the connected life, new ways to learn and the future of entertainment. 

Government-led inducement prizes are those initiated and funded by governments (but may not always be designed or administered by governments). They have been subject to less attention and scrutiny than those offered by private and philanthropic organizations.  Yet many governments, particularly the governments of the US and the UK, are making increasing use of inducement prizes to achieve a variety of public policy objectives.

SEVEN EXAMPLES OF GOVERNMENT-LED INDUCEMENT PRIZES

		The UK’s Dynamic Demand Prize Competition. Launched by NESTA (a UK Charitable Trust and with support from the UK Government and the European Commission) in July 2013. The challenge is to create a new product, technology or service that utilises data to significantly improve the ability of households or small businesses to demonstrate measurable reduction in carbon emissions by shifting energy demand to off peak times or towards excess renewable generation. (Prize Purse: £50,000).
		The Scottish Government’s Saltire Prize. Launched by the Scottish Government in 2008, the Saltire Prize will be awarded to the team that can demonstrate in Scottish waters, a commercially viable wave or tidal stream energy technology that achieves the greatest volume of electrical output over the set minimum hurdle of 100GWh over a continuous 2 year period using only the power of the sea. (Prize Purse: £10 million).
		The Nordic Governments’ Nordic Built Challenge. Launched by the Nordic Council of Ministers in 2011, the Nordic Build Challenge was an open multidisciplinary design contest for the refurbishment of five specific buildings (one in each of the Nordic countries). The objective was to encourage innovation and the development of sustainable, viable and scalable refurbishment concepts for some of the most common building types in the Nordic region. There were two separate stages to this competition (Stage 1 Prize Purse: 300 thousand Kroner; Stage 2 Prize Purse: 1 million Kroner).  The final winner of the prize went to a Danish project that points to new ways towards more “climate-friendly” construction.
		The European Union’s Vaccine Prize Competition. Launched by the European Commission in 2012, the competitors were asked to overcome one of the biggest barriers to using vaccines in developing countries: the need to keep them stable at any ambient temperature. (Prize Purse: €2 million) The winner of the prize, German biopharmaceutical company CureVac GmbH, was announced on March 10, 2014.
		The Government of New South Wales RTA Freeway Travel Time Prediction Prize. Launched by the Government of New South Wales (Australia) in the winter of 2010, invites contestants to predict travel time on Sydney's M4 freeway from past travel time observations and thereby network managers improve the general efficiency of the road transport system in Sydney and increase functionality on the government's live traffic website.  (Prize Purse: A$ 10,000) The winner of the prize was announced in early 2011 (Shi, 2011).
		The Government of British Columbia’s Aps4Climate Action (A4CA) Competition. Launched by the Government of British Columbia in 2010, A4CA invited Canadian software developers to raise awareness of climate change and inspire action to reduce carbon pollution by using BC Government climate change data in new applications for the web and mobile devices. (Prize Purse: $25,000 in cash prizes and $15,000 in non-monetary prizes). The winners of the prizes were announced in late 2010.
		The Government of the United States MTConnect Challenge. Launched on US government-wide platform (Challenge.gov) in 2013, the MTConnect Challenge  (sponsored by the US Department of Defense) seeks to engage and stimulate development of a broader base of advanced manufacturing intelligence software applications that acquire data utilizing the MTConnect standard (including for manufacturing enterprises within the US Department of Defense supply chain. There are two separate stages to this competition, with cash prizes at the conclusion of each state.  (Prize Purse Stage 1: $US 25,000; Prize Purse Stage 2: $US 225,000).

B. What do we know about inducement prizes & government-led inducement prizes?

• Prize contests appear to cluster both across time and technology fields. Figure 1 (below) shows the distribution of major private and public inducement prizes for technological and scientific achievements since 1700.

Figure 1
85 Major Private and Public Technology Inducement Prizes  1700 - 2007 by date of announcement (21 government-led)

Source:  Ian Currie + Associates based on data drawn from Masters and Delbecq (2008) and other sources.

• Existing assessments of inducement prize programs (private and government-led) tell us much about prize processes (including prize design), rather less about actual outputs, and even less about eventual outcomes. This judgement finds support in recent reviews of the state of evaluation research in the field of inducement prizes. Murray et. al. (2012) find that “reasonable accounts of historical cases exist” but few empirical analyses exist and that “…this lack of empirics remains worrisome as popular advocacy [for innovation prizes] grows.” Besharov and Williams (2012) state that: “…the harsh reality is that we currently have a very small evidence base [on innovation prizes] from which to draw policy conclusions.” Gök (2013) reports that: “Evidence on the effectiveness of 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 limited number of studies looked at if innovation inducement prizes led to more innovation itself or innovation outputs.”

• Governments currently provide only a small proportion of total inducement prize capital world-wide. McKinsey &Company (2009) estimate that total world new prize capital for the 2000-2008 period was US$ 375M (public and private capital).  Seventy percent of this amount represents inducement prizes as opposed to recognition prizes. According to McKinsey, 17 percent of the new prize capital was provided by governments. This amount of new prize capital is less than 1 percent of total OECD Gross Domestic Expenditures on Research and Development in 2008 alone (US$ 974 Billion).

• Over the past fifteen years, governments have increasingly used inducement prizes, although unevenly as between different national jurisdictions. Over the past decade, the US Congress granted prize authority to a select number of US federal government agencies, including the Department of Energy, the Department of Defense, and the National Aeronautics and Space Administration (Stine, 2009). Prize authority was expanded to other US federal government agencies when, in January of 2011, US President Barrack Obama signed into law the America COMPETES Reauthorization Act of 2010 (P.L. 111-358). The US federal government is outpacing all other governments in adopting inducement prizes

• Many inducement prizes across countries, and across the public, private and philanthropic sectors, continue to focus on achieving clearly defined scientific, technological or innovation objectives. However, the use of inducement prizes to achieve other broadly defined goals – e.g., “social innovation” goals and international development goals – are now making their presence felt. For example, a 2012 report from the X PRIZE Foundation, and commissioned by UK Department for International Development in collaboration with the Indian Institute of Technology Delhi, concluded that: “Our research suggests that innovation prizes — a proven and increasingly  popular tool — can provide incentives to solve key development challenges in areas where market signals are weak or non-existent.” (DFID, 2012).

• Government are expressing greater interest in inducement prizes because of: open innovation and open government concepts; demonstration effects of business and philanthropic inducement prizes; and the rise and influence of prize companies and consultants (see Table 1 below).

Company		Examples of Government Sector Clients
Ashoka Changemakers Canada		Government of British Columbia to launch inducement prizes in social policy areas.
Brightidea (US)		Government of Ireland, US State Department, City of San Francisco
Burson-Marsteller UK (in collaboration with NESTA - a UK Charitable Trust – and University College London)		European Commission  (awarded contract in 2013 for inducement prize design under Horizon 2020 Program)
Challengepost.com (US)		Awarded US federal government contract for Challenge.gov platform. Other government clients include the City of New York and the World Bank.
Health 2.0 (US)		US Department of Health and Human Services
Idea Crossing, Inc. (US)		Masdar City in Abu Dhabi (customization of software platform for second annual US $2.2M Zayed Future Energy Prize)
InnoCentive (US)		US federal government agencies, the European Commission, the UK Government (through acquisition of UK based OmniCompete in February 2012)
Kaggle (US)		US federal government agencies, the Government of New South Wales (Australia)
NineSigma.com (US)		The Government of Alberta's Climate Change and Emissions Management Corporation
TopCoder (US)		US federal government agencies (e.g., NASA)
X Prize Foundation (US)		The not-for-profit X PRIZE Foundation continues to be a major force. It has continually expanded the range of its activities since it was founded by Peter Diamandis in 1996. It funds, designs and administers various large inducement prizes either alone or in partnership with others. It is frequently consulted by various governments on the design of inducement prize programs, including: the US; the UK (including the Scottish Government); India; China; and also the European Commission. It has established XPRIZE Labs at the Massachusetts Institute of Technology, the University of Washington, and the University of Southern California to “…provide a platform to educate university students and faculty around the emerging field of prize theory.”