Prizes and the innovation economy

The New York Times writes about prizes and an innovation economy, "Win Fabulous Prizes, All in the Name of Innovation:"

'It’s a new kind of grant-making,' said Jonathan Greenblatt, anentrepreneur who sold his company, Ethos Water, to Starbucks and became a senior adviser to the X Prize Foundation. 'It’s a mode that encourages experimentation rather than prescribing solutions. It sets the stage for innovation and dynamism that the grantor can’t anticipate.'

Grant programs traditionally finance services and try to influence government policy, not market forces. In most cases, they award modest amounts, develop long-term relationships with grantees and aim to avoid risk.

'Foundations see their role as understanding what the problems are out there, what the solutions are, and what they can do to test the solutions,' said Mike Burns, a partner in Brody Weiser Burns, a consulting firm in Branford, Conn., that advises nonprofit groups. 'It’s very hands off. This is a new breed. They borrow from venture capitalism: they invest the money and have a say in what the outcome is.'

By combining elements of philanthropy and market driven activity, prizes appear to be a new way of freeing innovation.

How?

A quick search for Thomas A. Kalil, who is described in the article as the special assistant to the chancellor for science and technology at the University of California at Berkeley, turned up this paper on the role of prizes in technical innovation as well as its executive briefing. Win Fabulous Prizes references Kalil as someone with expertise in prize economics.

The Christian Science Monitor ran this story last year on the role of prizes in discovery.

You might also be interested in a blog post from Tom Vander Ark at the X-Prize Foundation. "Why prizes?" indeed. Elsewhere, Vander Ark says that rather than "push" people to solve problems, as does conventional philanthropy, prizes "pull" people to solve them. He has also called prize economics the "fourth sector" behind governments, markets and non-profits.

Like the idea of "network wealth," which proposes that cooperative networks have joined the market and the firm as a third value producing method, I'm very much interested in how prize-fueled innovation might represent a novel kind of economic activity.

Thoughts anyone?

Wayne