Competitive rewards are most effective in getting creative innovation proposals from employees, according to new research from the University of California San Diego.
Professor of economics Joshua Graff Zivin and assistant professor of management Elizabeth Lyons conducted research on how to motivate innovation proposals by creating a contest for the Baja California office of Thermo Fisher Scientific.
Participants in the competition, which was open to non-management employees of Thermo Fisher and other companies, were asked to make digital solutions to help share medical equipment across small healthcare clinics nearby.
But the participants weren’t competing for the same rewards. Those who signed up were randomly chosen to compete in a group in which the first-place entry garnered a $15,000 prize, or another group, in which $15,000 was distributed equally among the top 10 entries.
“Participants under the winner-takes-all compensation scheme submitted proposals that were significantly more novel than their counterparts in the other scheme,” Zivin and Lyons wrote in National Bureau of Economic Research (NBER) working paper. “While the two groups did not statistically differ from one another on their overall scores, the risk taking encouraged by the competition with a single prize resulted in innovators pursuing more creative solutions.”