As innovation is increasingly important to organizations, there is a growing exploration of what conditions might encourage people to be innovative.  New research from the University of California San Diego explores the various financial compensation packages available via innovation challenges to see which is most effective at securing participation.

The research revolved around a challenge the researchers created at the California office of biotech company Thermo Fisher Scientific.  The competition was open to all non-management staff at the firm, as well as those from other tech companies in the area, and participants were asked to design a digital solution to enable sharing medical equipment among small healthcare clinics.

The participants were randomly allocated to either a winner-takes-all category, in which there was a single prize awarded to the best candidate, or a top 10 category, in which the prize fund was spread equally among the best 10 entries.

“Participants under the winner-takes-all compensation scheme submitted proposals that were significantly more novel than their counterparts in the other scheme,” the authors say. “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.”

Incentives matter

The researchers believe their findings highlight how important incentives are at producing different outcomes from practically identical groups of people.  They argue that the single cash prize incentivized people in that group to push that bit further to make their contributions as creative as possible.

What’s more, despite the apparent risk vs reward trade offs in the winner-takes-all group, there was no real difference in the number of submissions.

The participants in the study could do so either on their own or as part of a team, and the results chime with previous work showing the value of teams, especially when those teams consist of people from diverse backgrounds.  Even among the teams, however, those in the winner-takes-all camp still performed better.

The researchers concede the creativity is not necessarily created by the incentive structure of a competition, but it is nonetheless supported and empowered by it.

“It is important to recognize that incentives alone are insufficient to spark creativity,” they conclude. “More work is required to understand the raw ingredients that shape the relationship between creativity and compensation.”