Incentivizing Innovation

            Prizes with an Eye Toward the Future is a New York Times article that details the benefits of prizes in innovation is insightful and it touches upon ideas discussed for social innovation. The idea behind prize money is that it brings some extrinsic motivation to smart people who can solve a problem others can’t. Without the prize these people may have never heard or even cared about the problem. The example given in the article discusses the prize awarded in 1714 to a British person who could figure out how to find the longitude of a boat at any given time. This innovation definitely has its societal benefits and it opens up the discussion for the role prizes and other incentives have in the field of social innovation and entrepreneurship.

            The key behind incentivizing people is giving them what they want. There can be incentives that are very ineffective when applied to the field of social entrepreneurship with one such incentive being patents. Patents discourage meaningful innovation because they allow the patent holder to control the market for their good for twenty years. Patents promote innovation in fields that can lead to large capital gains in those years. This dissuades entrepreneurs from researching difficult fields such as rare diseases. Prize money also has its shortcomings. A one-time disbursement of funds dissuades further innovation from happening.

            Perhaps the best motivator for social innovators and entrepreneurs is profit. Building a business around an idea is one of the best ways to see it succeed because the incentive for profit is tied into how effective the product is. A product that properly addresses the problems of the community it’s supposed to serve will find success. Properly addressing the problems of the community involves having an effective product, a fair price point, and the ability to scale operations. KickStart is a good example of companies that can provide socially innovative products with a business approach that benefits the consumer and incentivizes the producer through profit. The classical approach to social innovation often involves NGO’s and it shies away from a classical business model. What KickStart has demonstrated is that the classical business model can work well within the world of social innovation without sacrificing the potential impact of the product. There is already a move toward facilitating the creation of for-profit businesses with an emphasis on societal well-being through B-corps. Though B-corps is a move in the right direction, governments should not stop there to facilitate innovation. The for-profit model has been demonstrated to be one of the best motivators for social entrepreneurs. It would be beneficial to facilitate the creation of these businesses that want to create social change instead of pursuing the disbursement of one-time prizes that do little to insure long-term impact.