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  • Tom Nicholas

    1. Harvard Business School, U.S.A.
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    • 1I thank the anonymous referees, Jim Bessen, Fabian Drixler (especially for help with the population data), Masahisa Fujita, Tim Guinnane, Naomi Lamoreaux, Petra Moser, Ramana Nanda, Hiroyuki Odagari, Heidi Williams, and seminar participants at Hitotsubashi (IIR), Kobe (RIEB), Sciences-Po, Strasbourg, and Yale for very helpful comments and Mayumi Okubo for exemplary translation efforts and assistance with data sources. Teresa Amabile, Geoff Jones, and Kash Rangan provided funding via Harvard Business School’s Division of Research. Please address correspondence to: Tom Nicholas, Harvard Business School, Harvard University, Soldiers Field Road, Boston, MA 02163, U.S.A. Phone: (617) 495-6505. Fax: (617) 496-9272. E-mail:

  • Manuscript received May 2011; revised February 2012.


Japan’s hybrid innovation system during the Meiji era provides a useful laboratory for examining the effectiveness of complementary incentives to patents. Patents were introduced in 1885, and by 1911 1.2 million mostly nonpecuniary prizes were awarded at 8,503 competitions. Prizes provided a strong boost to patents, especially in less developed prefectures, and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes, relative to distant control prefectures without prizes. Linking competition expenditures with the expected market value of patents induced by the prizes permits a cost–benefit assessment of the prize competitions to be made.