Prize-oriented structures have often inverted innovation potential and only rewarded wealthy investors who could compete to win

Patents comprised a central feature of U.S. innovation policies, and this orientation is reflected in the academic literature. By way of contrast, relatively little systematic evidence has been produced in the area of prize incentives. In the earliest such attempt, an insightful nineteenth century observer in England, Samuel Sidney, sought to determine “Whether . . . manufacturing inventions [can be] stimulated, by invitations to compete for substantial or honorary awards.”61 Sidney spent ten years investigating the data on prizes at exhibitions as well as the incentives that various societies offered for encouraging industry. His investigations led him to conclude that prizes generally tended to be inefficient, while improvements in market demand and competition offered more effective inducements for inventive activity. The prize system, he found, merely encouraged “a long list of machines which, for practical purposes, are no better than toys.”62 For instance, the market value of useful inventions tended to be far greater than any prize that could be offered, whether by private or state initiative. Even prestigious institutions such as the Royal Agricultural Society and the RSA had failed to develop truly significant inventions.63 Moreover, a candidate for a prize had an incentive to overspend on the item in an attempt to win, regardless of whether such investments were practicable in the marketplace. As a result, winners tended to be among the wealthiest of the competitors. However, Sidney found that, from the perspective of manufacturers or retailers, prizes served as a useful marketing strategy, comparable to advertisements and enhanced brand name capital. Sidney’s thoughtful assessments are all consistent with the quantitative analysis of national and international prize systems discussed here.