Cash is Nice, but Give Me a Medal Instead

Do awards such as the $10 million X Prize produce more innovation? Well, the contest did result in creation of the first non-government, reusable, suborbital manned spacecraft. But the money hardly covered the price of postage for the project, which cost the winning team over $100 million to develop.

The question over how to motivate creativity is an important one, especially as an increasing number of public and private firms offer prizes -- cash or other rewards-- to get innovators focused on important problems. Do these competitions work and, if so, what kind of rewards works best?

Researchers Liam Brunt, of the the Norwegian School of Economics and Business Administration, and Josh Lerner and Tom Nicholas of Harvard Business School, looked to history to provide an answer. They studied patent awards and prizes awarded by the Royal Agricultural Society of England (RASE) for agricultural-related innovations between 1839 and 1939. RASE offered both cash awards and medals to winners.

And here's what the researchers discovered, news you can use when you design your own contest to generate good ideas from employees.

Yes, contests do work to generate many creative ideas.
Money is OK as a motivator, but non-pecuniary awards can work better.

The problem with money is that determining (and then coming up with) an appropriate number is an administrative nightmare. And for complex projects, the cash won't be enough to cover expenses. Looking at 100 years of RASE contests the researchers concluded that inventors were more motivated by medals, free publicity and public approbation. The publicity helped when the inventors went on to sell their inventions.

So polish up some medals and let the ideas flow.

Related Reading

(Photo by Flickr user Blmurch, CC 2.0)

Sean Silverthorne

Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.

More from CBS News