Incentives for innovation — contest design with proportional prizes

A longstanding topic for my research is the impacts of innovation, and how improving incentives can guide innovation in the food system.  This is the work for which I was awarded the AAEA’s Bruce Gardner Memorial Prize for Applied Policy Analysis in 2013, and which was cited in the development of the multidonor $118 million AgResults incentive program.

My latest writing on this is a July 2014 blog post on the AgResults website, and an earlier May 2012 essay entitled Transformational Incentives for USAID’s Frontiers in Development  book and conference; with related CGD paper by Kim Elliott.  Those applications draw on a much more general research paper on theoretical predictions and experimental results in artificial contests and laboratory competitions, summarized in these presentation slides.

More details on the history and  motivation for new kinds of contests comes from an IFPRI Discussion Paper entitled Accelerating Innovation which describes the history and economics of innovation incentives, and shows how African agriculture could benefit from a new kind of technology contest in which proportional cash payments would be made to innovators after their technologies are adopted, like a royalty payment for non-market services.  Prize rewards would be strictly proportional to the extent of adoption and impact, using verifiable data from controlled experiments and farm surveys to document which new techniques work best in what areas.

An earlier journal article, Paying for Prosperity: How and Why to Invest in Agricultural R&D for Africa motivates the idea in terms of what’s needed for poverty alleviation in Africa.  My first article on this subject was in 2003, entitled Research Prizes: A Mechanism to Reward Agricultural Innovation in Low-Income Regions.

The potential role of proportional prizes as opposed to other innovation incentives is discussed in detail by Kim Elliott at the Center for Global Development’s in her 2010 paper on pull mechanisms for agricultural innovation.  In 2011, the World Bank’s Agricultural Pull Mechanism initiative is actively considering how to design new contests.  Much can be learned from other sectors:  here is a fun example of using proportional prizes to keep golf players competitive, and a serious proposal for a “health impact fund” using proportional payments for health.

The research behind this initiative has been generously supported by grants from the Andrew S. Adelson Family Foundation and the International Food Policy Research Institute.  The approach has been endorsed by FARA, the Forum for Agricultural Research in Africa, and it builds on a decade of USAID-funded impact-assessment training workshops and case studies in West Africa.