Parallel Innovation Contests

Abstract

We study multiple parallel contests where contest organizers elicit solutions to innovation-related problems from a set of solvers. Each solver may participate in multiple contests and exert effort to improve her solution for each contest she enters, but the quality of her solution at each contest also depends on an output uncertainty. We first analyze whether an organizerÕs profit can be improved by discouraging solvers from participating in multiple contests. We show, interestingly, that organizers benefit from solversÕ participation in multiple contests when the solverÕs output uncertainty in these contests is sufficiently large. A managerial insight from this result is that when all organizers elicit innovative solutions rather than low-novelty solutions, organizers may benefit from solversÕ participation in multiple contests. We also show that organizersÕ average profit increases with solversÕ participation in multiple contests even when some contests seek low-novelty solutions as long as other contests seek cutting-edge innovation. We further show that an organizerÕs profit is unimodal in the number of contests, and the optimal number of contests increases with the solverÕs output uncertainty. This finding may explain why many organizations run multiple contests in practice, and it prescribes running a larger number of contests when the majority of these organizations seek innovative solutions rather than low-novelty solutions.