User Experience Arts and Innovation

User Experience Arts has a post about the recent New York Times article "The Amateur Future of Space Travel" on the NASA Centennial Challenges. The post has some thought-provoking questions about why such innovation often has to come from outside a government administration or a corporation, which have much more resources (such as people and money) that should help innovation. The post discusses some typical reasons holding back innovation in such environments: the sterile office environment itself, the pressure not to "rock the boat", excessive paperwork, and the lack of reward for innovation in a large organization.

This brings up the question: what can a large organization do to encourage innovation? Can they institute internal reforms to encourage innovation? I've linked a couple books on the right of the page that review this topic, and there is much more to be found. My questions is: Can a large organization (eg: a corporation) use an internal version of the prize concept to foster innovation in-house, for example to solve specific technical problems, without taking away from ongoing business efforts? Can prizes be a more-widely used method for corporations to encourage innovations from (known and unknown) suppliers?