Impact of Past Performance and Strategic Bidding on Winner Determination of Open Innovation Contest

Online innovation contests - seekers posting innovation projects to which solvers submit solutions - have been used by more and more firms for idea seeking and problem solving. Most studies of contests take the perspective of innovation seekers, and little is known abo ut solvers’ strategies and responses. However, contest performance relies on understanding of the quality of solvers it may draw and the arrival times of best solutions. This paper provides insights to these questions. Specifically, we show that past performance of a solver is a good predictor of his future winning probability and that winners are more likely to be those who submit early or later during the submission period as opposed to those submit in the middle. We also find that strategic waiting (to submit solutions) is associated with higher winning probability. Furthermore, we show that different contests appear to attract solvers with different expertise, which invalids the common assumption of fixed solver expertise distribution across projects in previous literature. This finding has strategic implications to the design of contest parameters.