Incentives and Problem Uncertainty in Innovation Contests: An Empirical Analysis
TL;DR: It is shown 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 and higher uncertainty reduces the negative effect of added competitors on incentives.
Abstract: 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 of all competitors in a contest to exert effort and make investments. At the same time, adding competitors 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. Thus, uncertainty and the nature of the problem should be explicitly considered in the design of innovation tournaments. We explore the implications of our findings for the theory and practice of innovation contests.
This paper was accepted by Christian Terwiesch, operations management.
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TL;DR: The organizational research implications of these three digital innovation traits are explored and research opportunities for organization science scholars are identified.
Abstract: Our era is one of increasingly pervasive digital technologies, which penetrate deeply into the very core of the products, services, and operations of many organizations and radically change the nature of product and service innovations. The fundamental properties of digital technology are reprogrammability and data homogenization. Together, they provide an environment of open and flexible affordances that are used in creating innovations characterized by convergence and generativity. An analysis of convergence and generativity observed in innovations with pervasive digital technologies reveals three traits: (1) the importance of digital technology platforms, (2) the emergence of distributed innovations, and (3) the prevalence of combinatorial innovation. Each of the six articles in this special issue relates to one or more of these three traits. In this essay, we explore the organizational research implications of these three digital innovation traits and identify research opportunities for organization science scholars. Examples from the articles in this special issue on organizing for innovation in the digitized world are used to demonstrate the kind of organizational scholarship that can faithfully reflect and inform innovation in a world of pervasive digital technologies.
1,493 citations
Cites background from "Incentives and Problem Uncertainty ..."
...Consequently, firms are drawing on novel forms of organizing, such as online communities (Faraj et al. 2011), open innovation (Boudreau 2010), and innovation challenges (Boudreau et al. 2011), to harness creativity outside of the organization....
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...2011), open innovation (Boudreau 2010), and innovation challenges (Boudreau et al. 2011), to harness creativity outside of the organization....
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01 Mar 2011
TL;DR: In this paper, the MIT Open Access Articles collection at https://dspace.mit.edu/handle/1721.1/127236 is updated with an updated license.
Abstract: A version of this paper with an updated license is available in the MIT Open Access Articles collection at https://dspace.mit.edu/handle/1721.1/127236.
870 citations
23 Feb 2013
TL;DR: This paper outlines a framework that will enable crowd work that is complex, collaborative, and sustainable, and lays out research challenges in twelve major areas: workflow, task assignment, hierarchy, real-time response, synchronous collaboration, quality control, crowds guiding AIs, AIs guiding crowds, platforms, job design, reputation, and motivation.
Abstract: Paid crowd work offers remarkable opportunities for improving productivity, social mobility, and the global economy by engaging a geographically distributed workforce to complete complex tasks on demand and at scale. But it is also possible that crowd work will fail to achieve its potential, focusing on assembly-line piecework. Can we foresee a future crowd workplace in which we would want our children to participate? This paper frames the major challenges that stand in the way of this goal. Drawing on theory from organizational behavior and distributed computing, as well as direct feedback from workers, we outline a framework that will enable crowd work that is complex, collaborative, and sustainable. The framework lays out research challenges in twelve major areas: workflow, task assignment, hierarchy, real-time response, synchronous collaboration, quality control, crowds guiding AIs, AIs guiding crowds, platforms, job design, reputation, and motivation.
836 citations
Cites background from "Incentives and Problem Uncertainty ..."
..., contests that choose one entry [8,19,20]) to highly serial processes with work passed from one worker to the next (e....
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Posted Content•
TL;DR: In this paper, the authors outline a framework that will enable crowd work that is complex, collaborative, and sustainable, and lay out research challenges in twelve major areas: workflow, task assignment, hierarchy, real-time response, synchronous collaboration, quality control, crowds guiding AIs, AIs guiding crowds, platforms, job design, reputation, and motivation.
Abstract: Paid crowd work offers remarkable opportunities for improving productivity, social mobility, and the global economy by engaging a geographically distributed workforce to complete complex tasks on demand and at scale. But it is also possible that crowd work will fail to achieve its potential, focusing on assembly-line piecework. Can we foresee a future crowd workplace in which we would want our children to participate? This paper frames the major challenges that stand in the way of this goal. Drawing on theory from organizational behavior and distributed computing, as well as direct feedback from workers, we outline a framework that will enable crowd work that is complex, collaborative, and sustainable. The framework lays out research challenges in twelve major areas: workflow, task assignment, hierarchy, real-time response, synchronous collaboration, quality control, crowds guiding AIs, AIs guiding crowds, platforms, job design, reputation, and motivation.
803 citations
TL;DR: In this article, the authors assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single-user individuals or firms and open collaborative innovation and conclude that both models increasingly compete with and may displace producer innovation in many parts of the economy.
Abstract: In this paper, we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single-user individuals or firms and open collaborative innovation. We analyze the design costs and architectures and communication costs associated with each model. We conclude that both innovation by individual users and open collaborative innovation increasingly compete with and may displace producer innovation in many parts of the economy. We explain why this represents a paradigm shift with respect to innovation research, policy making, and practice. We discuss important implications and offer suggestions for further research.
767 citations
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TL;DR: In this paper, the authors developed an evolutionary theory of the capabilities and behavior of business firms operating in a market environment, including both general discussion and the manipulation of specific simulation models consistent with that theory.
Abstract: This study develops an evolutionary theory of the capabilities and behavior of business firms operating in a market environment. It includes both general discussion and the manipulation of specific simulation models consistent with that theory. The analysis outlines the differences between an evolutionary theory of organizational and industrial change and a neoclassical microeconomic theory. The antecedents to the former are studies by economists like Schumpeter (1934) and Alchian (1950). It is contrasted with the orthodox theory in the following aspects: while the evolutionary theory views firms as motivated by profit, their actions are not assumed to be profit maximizing, as in orthodox theory; the evolutionary theory stresses the tendency of most profitable firms to drive other firms out of business, but, in contrast to orthodox theory, does not concentrate on the state of industry equilibrium; and evolutionary theory is related to behavioral theory: it views firms, at any given time, as having certain capabilities and decision rules, as well as engaging in various ‘search' operations, which determines their behavior; while orthodox theory views firm behavior as relying on the use of the usual calculus maximization techniques. The theory is then made operational by the use of simulation methods. These models use Markov processes and analyze selection equilibrium, responses to changing factor prices, economic growth with endogenous technical change, Schumpeterian competition, and Schumpeterian tradeoff between static Pareto-efficiency and innovation. The study's discussion of search behavior complicates the evolutionary theory. With search, the decision making process in a firm relies as much on past experience as on innovative alternatives to past behavior. This view combines Darwinian and Lamarkian views on evolution; firms are seen as both passive with regard to their environment, and actively seeking alternatives that affect their environment. The simulation techniques used to model Schumpeterian competition reveal that there are usually winners and losers in industries, and that the high productivity and profitability of winners confer advantages that make further success more likely, while decline breeds further decline. This process creates a tendency for concentration to develop even in an industry initially composed of many equal-sized firms. However, the experiments conducted reveal that the growth of concentration is not inevitable; for example, it tends to be smaller when firms focus their searches on imitating rather than innovating. At the same time, industries with rapid technological change tend to grow more concentrated than those with slower progress. The abstract model of Schumpeterian competition presented in the study also allows to see more clearly the public policy issues concerning the relationship between technical progress and market structure. The analysis addresses the pervasive question of whether industry concentration, with its associated monopoly profits and reduced social welfare, is a necessary cost if societies are to obtain the benefits of technological innovation. (AT)
22,566 citations
Book•
01 Jan 1942
TL;DR: In this paper, the authors present a history of the first half of the 20th century, from 1875 to 1914, of the First World War and the Second World War.
Abstract: Introduction. Part I: The Marxian Doctrine. Prologue. I. Marx the Prophet. II. Marx the Sociologist. III. Marx the Economist. IV Marx the Teacher. Part II: Can Capitalism Survive? Prologue. V. The Rate of Increase of Total Output. VI. Plausible Capitalism. VII. The Process of Creative Destruction. VIII. Monopolistics Practices. IX. Closed Season. X. The Vanishing of Investment Opportunity. XI. The Civilization of Capitalism. XII. Crumbling Walls. XIII. Growing Hostility. XIV. Decomposition. Part III: Can Socialism Work? XV. Clearing Decks. XVI. The Socialist Blueprint. XVII. Comparison of Blueprints. XVIII. The Human Element. XIX. Transition. Part IV: Socialism and Democracy. XX. The Setting of the Problem. XXI. The Classical Doctrine of Democracy. XXII. Another Theory of Democracy. XXIII. The Inference. Part V: A Historical Sketch of Socialist Parties. Prologue. XXIV. The Nonage. XXV. The Situation that Marx Faced. XXVI. From 1875 to 1914. XXVII. From the First to the Second World War. XXVIII. The Consequences of the Second World War. Preface to the First Edition, 1942. Preface to the Second Edition, 1946. Preface to the Third Edition, 1949. The March Into Socialism. Index.
16,667 citations
TL;DR: In this paper, the authors consider the relation between the exploration of new possibilities and the exploitation of old certainties in organizational learning and examine some complications in allocating resources between the two, particularly those introduced by the distribution of costs and benefits across time and space.
Abstract: This paper considers the relation between the exploration of new possibilities and the exploitation of old certainties in organizational learning. It examines some complications in allocating resources between the two, particularly those introduced by the distribution of costs and benefits across time and space, and the effects of ecological interaction. Two general situations involving the development and use of knowledge in organizations are modeled. The first is the case of mutual learning between members of an organization and an organizational code. The second is the case of learning and competitive advantage in competition for primacy. The paper develops an argument that adaptive processes, by refining exploitation more rapidly than exploration, are likely to become effective in the short run but self-destructive in the long run. The possibility that certain common organizational practices ameliorate that tendency is assessed.
16,377 citations
Book•
01 Jan 1921
TL;DR: In Risk, Uncertainty and Profit, Frank Knight explored the riddle of profitability in a competitive market profit should not be possible under competitive conditions, as the entry of new entrepreneurs would drive prices down and nullify margins, however evidence abounds of competitive yet profitable markets as mentioned in this paper.
Abstract: In Risk, Uncertainty and Profit, Frank Knight explored the riddle of profitability in a competitive market profit should not be possible under competitive conditions, as the entry of new entrepreneurs would drive prices down and nullify margins, however evidence abounds of competitive yet profitable markets. To explain this seeming paradox, Knight uncovers the distinction between calculable risk and essentially unknowable uncertainty. Knight argued that risk stems from repeated events, which therefore allow probabilities to be calculated and factored into decisions, as for instance insurers do. Uncertainty however, stems from events that are unpredictable and as such cannot be prepared against. According to Knight, it is the interplay between risk and uncertainty on the one hand and competition between incumbent and new entrepreneurs that accounts for the enormous variation in profitability across firms and, for the same firms, over time. His insights on the sources of profit have been instrumental in shaping modern economic theory and to the development of a useful understanding of probability. This New Edition has been typeset with modern techniques and contains a newly compiled Index of important topics. It has been painstakingly proofread to ensure that it is free from errors and that the content is faithful to the original.
10,309 citations
Book•
01 Jan 1982TL;DR: In this paper, the authors present an Evolutionary Model of Economic Growth as a Pure Selection Process and a Schumpeterian Competition for economic growth in the United States, with a focus on the evolution of public policies and the role of analysis.
Abstract: I. OVERVIEW AND MOTIVATION 1. Introduction 2. The Need for an Evolutionary Theory II. ORGANIZATION-THEORETIC FOUNDATIONS OF ECONOMIC EVOLUTIONARY THEORY 3. The Foundations of Contemporary Orthodoxy 4. Skills 5. Organizational Capabilities and Behavior III. TEXTBOOK ECONOMICS REVISITED 6. Static Selection Equilibrium 7. Firm and Industry Response to Changed Market Conditions IV. GROWTH THEORY 8. Neoclassical Growth Theory: A Critique 9. An Evolutionary Model of Economic Growth 10. Economic Growth as a Pure Selection Process 11. Further Analysis of Search and Selection V. SCHUMPETERIAN COMPETITION 12. Dynamic Competition and Technical Progress 13. Forces Generating and Limiting Concentration under Schumpeterian Competition 14. The Schumpeterian Tradeoff Revisited VI. ECONOMIC WELFARE AND POLICY 15. Normative Economics from an Evolutionary Perspective 16. The Evolution of Public Policies and the Role of Analysis VII. CONCLUSION 17. Retrospect and Prospect References Index
6,823 citations