Sourcing Innovation: On Feedback in Contests

34 Pages Posted: 13 Sep 2015 Last revised: 22 Dec 2017

See all articles by Jurgen Mihm

Jurgen Mihm

INSEAD

Jochen Schlapp

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH

Date Written: December 21, 2017

Abstract

It is notoriously difficult to provide outside parties with adequate incentives for innovation. Contests - in which solvers compete for a prize offered by the contest holder - have been shown to be an effective incentive mechanism. Despite considerable interest in this concept, we lack a thorough understanding of important aspects of contests; in particular, feedback from the contest holder to the solvers has received only limited attention. This paper discusses how contest holders can improve contest outcomes by devising an optimal information structure for their feedback policies. We first identify when, and when not, to give feedback as well as which type of feedback to give: public (which all solvers can observe) or private (which only the focal solver can observe). We uncover a nontrivial relationship between contest characteristics and optimal feedback choices. Second, we examine whether the contest holder should mandate interim feedback or instead allow solvers to seek feedback at their own discretion. Third, we discuss how changing the granularity of feedback information affects its value to solvers.

Keywords: Contest, Open Innovation, Innovation Incentives, Feedback and Learning, Research and Development

Suggested Citation

Mihm, Jurgen and Schlapp, Jochen, Sourcing Innovation: On Feedback in Contests (December 21, 2017). INSEAD Working Paper No. 2017/79/TOM. Available at SSRN: https://ssrn.com/abstract=2659171 or http://dx.doi.org/10.2139/ssrn.2659171

Jurgen Mihm (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Jochen Schlapp

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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