Evidence review – environmental innovation prizes for development. DEW Point Enquiry No. A0405

Abstract

This paper assesses the evidence underlying the effectiveness and value for money of innovation prizes, and seeks to address two fundamental questions:
a. Do prizes work ‐ are they effective in stimulating innovation?
b. Are prizes better than other methods to achieve the same purpose (value for money)?

An independent perspective on the strength of evidence surrounding the impact of 16 key innovation prizes has been combined to learn lessons, which can help shape potential future investments in this area. By gathering evidence from a broad range of prizes, grouped into four main prize types (innovation awards, open innovation, social prizes and market stimulation prizes), this research has found that:

a. Prizes do work ‐ they can be effective in stimulating innovation in appropriate circumstances if undertaken within the right environment and appropriately designed;

b. While it is possible to illustrate returns on investment (RoI) in hard numbers (e.g. benefit cost ratios spanning 2:1 to 33:1 for innovation awards; 50‐80% cost reductions and RoI up to 182% from open innovation prizes; benefit costs ratios around 8:1 to 16:1 for market stimulation (grand) prizes) the approaches used to estimate longer term benefits, beyond just leveraged investment, are highly dependent on the nature of the prize. Whether or not the prize approach represents better value for money than alternatives, is more difficult to assess due to a lack of data in the prize market and because few have measured the RoI of other traditional methods. However, while the optimal level of investment in prizes is not clear, it is likely to be much larger than at present and the potential payoffs of adding these new mechanisms to a toolkit for encouraging innovation are considerable.

Citation

Everett, B.; Barnett, C.; Verma, R. Evidence review – environmental innovation prizes for development. DEW Point Enquiry No. A0405. DEW Point, the DFID Resource Centre for Environment, Water and Sanitation, UK (2011) 119 pp.

Evidence review – environmental innovation prizes for development. DEW Point Enquiry No. A0405

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