Incentivizing Innovation: Article Review and Analysis Report

This report provides a comprehensive review of an article focused on the creation of incentives for innovation within the business environment. The article emphasizes the dynamic and ever-changing nature of the business world, highlighting the necessity for businesses to embrace innovation to remain competitive. The report delves into the core arguments of the article, including the importance of incentivizing entrepreneurs and employees to foster innovation, the role of probability theory in motivation, and the impact of innovation on economic and societal development. The review also explores the article's findings, such as the use of pay-for-performance and the impact of incentives on employee productivity. Furthermore, the report addresses the limitations of the article, the data sources used, and the key issues and questions raised by the author, including the necessity of incentives for innovation and different approaches affecting entrepreneurship. The report concludes by summarizing the article's interpretation of innovation as a key to success and its recommendation of pay-for-performance practices.

CREATING INCENTIVE
FOR INNOVATION

Table of Content
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Creating incentive for innovation is a newer concept within the business environment. It
is because of the reason that in this fast changing and dynamic environment there are many
advancement and innovation which the company needs to follow for being successful (Boudreau
and Lakhani, 2015). The assignment will cover a review of an article relating to creating
incentive for innovation which will highlight the review of the whole article.
MAIN BODY
Article
The present article is about creating incentive for innovation. Since the business
environment is very dynamic and changing so it is very crucial to have innovation within the
business. So for promoting innovation some incentives and rewards for long term are attached to
it. Entrepreneur is a person who starts a business where all the risk of business is borne by
entrepreneur only (Cimoli, Carlos Ferraz and Primi, 2016). Entrepreneurship is the process of
developing the business venture and leading it to profits. Innovation refers to as producing or
making of completely new product or service or bringing in any new change within the existing
product.
Area under discussion
The article will discuss the importance of innovating to have a sustainable business and
growth. With the increase in the technology like mobile networks, artificial intelligence, data
mining etc. it is very necessary for the business to take proper measure to innovate so that they
are in the race of competition (Cockburn, Henderson and Stern, 2018). The article focused on the
importance of innovation within the business context. It is important to provide for incentives for
innovating because of the reason that incentives will encourage entrepreneurs and other business
to innovate. Also it discussed the fact that motivation for innovation can be done by probability
theory and using experimental evidence.
Main findings
The main findings from the article was that innovation is important within the business
because it helps in gaining a competitive advantage over the other (Renwick, Brogan and
Mossialos, 2016). The article investigated that providing for incentives to the employees
increases their productivity as they are motivated to do innovation and they will be provided with
incentives. The article also found that probability theory called the bandit problem is used for
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creating incentive for innovation and this theory states that there are two participants that is
principal and agent. The principle wants to motivate the agents to bring in innovation within the
business. The innovation within the the business also helps economy and society in development
(Tigabu, Berkhout and van Beukering, 2015).
Limitations
The limitation relating to the article is that many people resists to innovate as there is
chances of facing losses due to wrong innovation. The entrepreneur on the other hand, is a
person who does not focus on any limitations while innovating any new product or service. But
then also there are certain limitations which may hamper or limit the process of innovation by the
entrepreneur. There can be many limitation like lack of time and money, entrepreneur do not
have proper knowledge, there can be lack of resources form the external environment and many
other limitations.
Author's data and evidence comes from
The data and information given in the article comes from the researches done at Howard
Hughes Medical Institute (HHMI) and its comparison with National Institute of Health (NIH).
The HHMI is known for rewarding long term success of the innovating and and provides
freedom to experiment and offers extensive feedback (Mele and Russo - Spena, 2015).
Main issues and questions raised by author
The main issues raised by the author is that is incentive necessary for innovating. Another
issue is different approaches affecting entrepreneurship across the globe. In the experiment
How they are addressed
The issue that incentive is necessary for innovating is addressed and proved with the help
of an experimental evidence. In the experiment 379 participants were recruited in Yale school of
management where they had to operate a computerized lemonade stand and were divide din three
groups with different compensation schemes. One was paid fixed wage another was standard pay
for performance and the last group was paid a fixed percentage of profits (Wan, Williamson and
Yin, 2015). With the results of this experiment it was concluded that the group which was pay
for performance got the maximum wages as they were motivated by the fact that if they perform
better they will receive more wages.
Interpretation made by author
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The author in the article interpreted that innovation is a key to success because it helps in
developing new and advanced products and services within the business environment
(Dechezleprêtre, Martin and Bassi, 2016). The author articulated that for an entrepreneur
innovation is the most important skill or competency which differentiates it from other
businessmen. Therefore, it is interpreted that entrepreneur must follow the practice of pay- for-
performance because of the reason that this technique helps employees to perform to their fullest
capacity because if they will perform better than they will be paid more.
Is text balanced
Yes the article was balanced that is it is fair because it suggests correct things only. It is
fair enough to employ the method of pay according to the performance as it is good because it
will increase the efficiency and productivity of the employees and they will perform much better.
Does author make original contribution to the topic
Yes, the author in the article has made the original contributions within the article to
prove the fact that incentives are necessary for increasing innovations (Wang, Zhao and
Thornhill, 2015). This the author has concluded by applying two theories that is probability
theory and evidence based experiment.
CONCLUSION
With the end of the assignment it can be interpreted that for being in the competition the
entrepreneurs have to do innovations in their entrepreneurial ventures so that they go ahead in
the direction of growth and development. With the review of this article it was proved that yes
for providing incentives to the entrepreneurs for innovating is necessary because incentives or
higher pay motivates the entrepreneur to work even more better and efficiently.
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REFERENCES
Books and journals
Boudreau, K.J. and Lakhani, K.R., 2015. “Open” disclosure of innovations, incentives and
follow-on reuse: Theory on processes of cumulative innovation and a field experiment
in computational biology. Research Policy. 44(1). pp.4-19.
Cimoli, M., Carlos Ferraz, J. and Primi, A., 2016. Science, technology and innovation policies in
global open economies: reflections from Latin America and the Caribbean.
Cockburn, I.M., Henderson, R. and Stern, S., 2018. The impact of artificial intelligence on
innovation (No. w24449). National Bureau of Economic Research.
Dechezleprêtre, A., Martin, R. and Bassi, S., 2016. 10. Climate change policy, innovation and
growth. Handbook on Green Growth, p.217.
Mele, C. and Russo - Spena, T., 2015. Innomediary agency and practices in shaping market
innovation. Industrial Marketing Management. 44. pp.42-53.
Renwick, M.J., Brogan, D.M. and Mossialos, E., 2016. A systematic review and critical
assessment of incentive strategies for discovery and development of novel
antibiotics. The Journal of antibiotics. 69(2). p.73.
Tigabu, A.D., Berkhout, F. and van Beukering, P., 2015. Technology innovation systems and
technology diffusion: Adoption of bio-digestion in an emerging innovation system in
Rwanda. Technological Forecasting and Social Change. 90. pp.318-330.
Wan, F., Williamson, P.J. and Yin, E., 2015. Antecedents and implications of disruptive
innovation: Evidence from China. Technovation. 39. pp.94-104.
Wang, T., Zhao, B. and Thornhill, S., 2015. Pay dispersion and organizational innovation: The
mediation effects of employee participation and voluntary turnover. Human
Relations. 68(7). pp.1155-1181.
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