2 Topic To remain successful in the face of competition, organizations have to innovate. As an example, think of using technology to develop new products and services. Innovation, however, is a lengthy and an uncertain process, with many (if not most) projects ending in failure. Organizations thus have to pay careful attention to how they motivate and reward their workers for innovation. For this assignment, I want you to use tools and concepts related to this class to think about how to design incentives for innovation in an organization. 1. Select a firm or company where innovation (for example developing new prod- ucts and services) plays a central role. Using specific examples from the com- pany, illustrate how innovation is a complex process - for example, the duration of projects and the probability of failure of projects. 2. Discuss why motivating innovation is difficult. For example, what can go wrong if we rely on very simple models of pay for performance. 3. Suggest way(s) in which the basic agency framework from this class (lectures 1 to 6) can be modified to address these difficulties in providing incentives in the point above. You can focus on one change or a group of relevant changes. 4. How would you incorporate this modification into the model? You do not need to solve the model - you can just summarize these changes through some key equations or even verbally describe these changes. 5. What tradeoffs do you expect from your proposed model? Think of yourself