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A Theoretical and Empirical Investigation of Feedback in Ideation Contests

Dr. Yu Wang is an Associate Professor of Marketing. Below is a summary of her research forthcoming in an elite journal Production and Operations Management.

In today’s world, businesses across various industries need to innovate faster than ever before to stay ahead of the competition. Researchers and practitioners have placed an increasing focus on ideation— a process of generating new ideas and solutions for business problems, creating designs and improving products or processes. In the past, employees and contractors were the principal sources of new ideas. Recent technological advances have enabled firms and organizations (i.e., seekers) to outsource ideation projects on the internet to a distributed group of experts and enthusiasts (i.e., solvers) in the form of an open call (i.e., “crowdsourcing”). In particular, ideation contest has gained massive popularity where the crowdsourcing process is organized as an open contest with a bounty for the best ideas or solutions.

Despite its popularity, ideation contests typically involve broad and non-detailed tasks where relevant parties have their own private and subjective taste for potential solutions. In practice, the seeker often provides solvers with feedback, which discloses useful information about her private taste. In this study, we develop a game-theoretic model of feedback in ideation contests where solvers’ solutions and the seeker’s feedback are publicly visible. We show that feedback plays an informative role in mitigating the information asymmetry between the seeker and solvers, thereby inducing solvers to exert more efforts in the contest. We also show that some key Contest and Solver Characteristics (CSC, including contest reward, contest duration, solver expertise, and solver population) have a direct effect on solver effort. Interestingly, by endogenizing the seeker’s feedback decision, we find that the optimal feedback volume increases with contest reward, contest duration, solver expertise, but decreases with solver population. Thus, CSC also has an indirect effect on solvers’ effort level, with the feedback volume mediating this effect. Employing a dataset from Zhubajie.com, a leading online ideation platform in China, we are able to study the role of feedback as well as the four CSC elements concurrently to uncover empirical evidence that is consistent with these theoretical predictions.

Our dataset included 9,771 logo design contests in which 415,779 solvers submitted a total of 572,046 logo designs and won nearly 3.4 million CNY in rewards. Firstly, we show that higher contest rewards incentivize greater solver effort, which suggests that firms seeking ideation solutions via contests should carefully select appropriate reward amounts to achieve optimal outcomes. This monetary aspect also has practical implications for platforms as their primary revenue source comprises the transaction fee charged at a certain percentage of the contest rewards. Secondly, our paper is the first to show that contest duration can positively affect solvers’ effort. Therefore, seekers must balance their requirements for high-quality solutions with their desire for rapid delivery time. Thirdly, we demonstrate that solvers with greater expertise tend to spend more time working on the task and are more likely to deliver solutions in larger quantity and higher quality. Therefore, it is important for seekers to keep track of solver profiles and to make sure that capable and experienced solvers can participate. Moreover, it is in the platforms’ best interest to build a large pool of high-quality solvers and encourage their active participation using various incentives. Lastly, our theory predicts that increased competition among solvers tends to dampen their effort level, a finding that is consistent with previous literature, although a larger solver population is not necessarily bad for seekers if they are looking for a single best solution.

To the best of our knowledge, existing literature usually takes the seekers’ feedback as exogenous, while our paper takes the first step towards proposing and validating that seekers are indeed strategic in determining whether to provide feedback and the feedback volume. In light of our results, when assessing the total effect of CSC on solvers’ effort level, firms should consider both the direct effect and indirect effect through feedback volume. Otherwise, the design of CSC could be suboptimal.

 

Jiang, Juncai and Yu Wang (2019). A Theoretical and Empirical Investigation of Feedback in Ideation Contests. Production and Operations Management.