Shortage of game-changing innovators and projects, or wrong incentives?

How can we create more major breakthroughs:  with more scientists and research projects or better incentives?

Fears that we could lose our competitive edge have pushed innovation to the forefront of economic strategies nowadays.  The holy grail of innovation is how to encourage game-changing innovation in addition to innovation that achieves incremental improvements.  Questions about how we can ensure future innovation usually call for increasing the number of innovators (i.e. promote science in schools!  Increase visa quotas!) or projects (i.e. more funding!).

But what if finding the right incentives for scientists, not just increasing the number of scientists or funded projects, was the answer to increasing innovation? Could you study research incentives themselves to see which ones produced the most breakthrough innovations?

MIT economists Pierre Azoulay and Gustavo Manso along with UC-San Diego Professor Joshyue Graff Zivin did just that in their recent study.  They compared the research output of US life scientists between 1993-1995 and essentially compared two different types of funding incentives: those of the Howard Hughes Medical Institute (HHMI) that provide long term and flexible funding to scientists and other programs that provide less funding and where the scientists must supplement their awards with National Institutes of Health (NIH) support.  They compared groups of researchers with comparable publication records before receiving different award types to measure the differences the awards themselves had on innovation. Here are the differences between the programs:

  • HHMI funding supports people not projects and offers fives years of funding, renewable as long as reviewers see effort, not necessarily results (though after 10 years something must be produced).
  • NIH funding picks projects not people and last only a few years.  Funding is linked to experiments or analyses and results are necessary before a project is approved for funding.

Which group of scientists found more breakthroughs?

HHMI scientists were twice as likely to publish highly-cited studies and were more likely to introduce new words and phrases into their field of research (i.e. game-changing innovation).  And, interestingly, they also produced more failures (studies that were virtually ignored).  It seems that HHMI’s incentives allowed for broader experimentation and more freedom to take different directions in research which resulted in both increases in failures and successes.

In contrast, the shorter review cycles and pre-determined deliverables of the NIH funding did not encourage greater experimentation or support failures.  These incentives resulted in fewer failures, but also fewer successes.

Incentives matter and long-term incentives tied to people seem to be more effective than shorter-term incentives tied to projects.  Scientists need breathing room to experiment beyond the bounds of their research and less time-pressure to do so. Incentives that allow for continuous innovation and risk in the discovery of innovation are more effective in encouraging game-changing innovation.  “Safer” funding produces just that: safer (incremental improvement) innovation.

How does this idea translate from the research lab into the workplace?
Check out Roger Martin and Jennifer Riel’s article “Innovation’s Accidental Enemies” on how leaders who demand proof that a new idea will work can inadvertently stifle innovation.  Just as offering funding that demands results upfront can discourage innovation, so can demanding proof in the workplace.  Breakthrough innovation requires entering into the unknown, thinking beyond what could be right now and focusing instead on what could be in the future.