The Effects of Increasing Competition and Uncertainty on Incentives and Extreme-Value Outcomes in Innovation Contests
Kevin J. Boudreau
London Business School; Harvard University - Institute for Quantitative Social Science
University of Toronto - Strategic Management; University of Toronto at Mississauga - Department of Management
Harvard Business School - Technology and Operations Management Group; Harvard University - Berkman Center for Internet & Society; Harvard Institute for Quantitative Social Science
November 24, 2010
Harvard Business School Technology & Operations Mgt. Unit Working Paper
Berkman Center Research Publication No. 2008-6
Contests are a historically important and increasingly popular mechanism for encouraging innovation. A central concern in designing innovation contests is how many competitors to admit. Using a unique data set of 9,661 software contests, we provide evidence of two coexisting and opposing forces that operate when the number of competitors increases. Greater rivalry reduces the incentives to expend effort by individual solvers across competitors of all skill levels, while at the same time, increases the likelihood that at least one competitor will find an extreme-value solution. We show that the effort-reducing effect of greater rivalry dominates for less uncertain problems whereas the effect on the extreme value prevails for more uncertain problems. Adding competitors thus systematically increases overall contest performance for high-uncertainty problems. We also find that higher uncertainty reduces the negative effect of added competitors on incentives. We explore the implications of our findings for the theory and practice of innovation contests.
Number of Pages in PDF File: 49
Keywords: innovation contests, competition, innovation, problem-solving, search, complexity, distributed innovation, platforms
JEL Classification: L1, L86, 03working papers series
Date posted: January 18, 2010 ; Last revised: November 26, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 0.422 seconds