The Role of Participation in Innovation Contests

52 Pages Posted: 28 Feb 2017 Last revised: 13 Jul 2020

See all articles by Konstantinos I. Stouras

Konstantinos I. Stouras

UCD, Michael Smurfit Graduate Business School

Jeremy Hutchison-Krupat

University of Cambridge - Judge Business School

Raul O. Chao

University of Virginia - Darden School of Business

Date Written: January 1, 2017

Abstract

Many firms use external contests to obtain solutions to their innovation challenges. A central managerial concern for these contests is how to screen the population for only the most capable people when the capability of the population is not known. If the manager sets the bar too high, then the contest could fail to receive submissions and the innovation could be delayed or even fail leaving the firm to suffer the consequences. Alternatively, if the bar is set too low, then too many people enter, which leads to increased competition, a lack of effort, and diminished performance, again leaving the firm to suffer the consequences. We study a situation in which the size of a heterogeneous population of solvers is known but the fraction of this population that actually submits a solution to the contest is unknown. We derive the optimal contest design to maximize the performance of the best submission while accounting for the possibility that the contest fails and the associated consequences of such a failure. Our results provide an alternative rationale for why many contests offer multiple awards: firms want to avoid the negative consequences associated with a contest that fails to yield a solution. We also consider alternative levers available to the firm when facing uncertain participation. These include the establishment of performance thresholds and the decision to expand the potential solver population.

Keywords: new product development, innovation contests, partial participation, incentives for participation

Suggested Citation

Stouras, Konstantinos I. and Hutchison-Krupat, Jeremy and Chao, Raul O., The Role of Participation in Innovation Contests (January 1, 2017). Darden Business School Working Paper No. 2924224, Available at SSRN: https://ssrn.com/abstract=2924224 or http://dx.doi.org/10.2139/ssrn.2924224

Konstantinos I. Stouras (Contact Author)

UCD, Michael Smurfit Graduate Business School ( email )

Carysfort Ave
Blackrock
Ireland

Jeremy Hutchison-Krupat

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Raul O. Chao

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-982-2681 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
261
Abstract Views
1,850
rank
130,973
PlumX Metrics