This study investigates whether bid advantages can effectively stimulate innovation, focusing on comparing bonus-based and prize-and-penalty-based incentives. We conduct a controlled laboratory experiment with two sequential stages: in the innovation stage, participants choose their level of R&D investment; in the auction stage, they compete for the procurement contract in a second-price auction. We explore five treatments, including benchmark (no incentive), constant and relative bonuses, and equivalent prize-and-penalty schemes. Theoretically, bonuses provide both a reward to the Innovator and a penalty to the Non-Innovator within the auction framework, whereas prize-and-penalty schemes transfer these effects to the innovation stage, eliminating uncertainty and auction distortion. We assess whether these mechanisms lead to greater innovation and whether the timing and framing of incentives influence participant behavior, particularly in light of sunk-cost bias.