Open or proprietary? Choosing the right crowdsourcing platform for innovation

Numerous reports have been published concerning the conditions under which a firm should rely on crowdsourcing for its innovation processes. This choice is the first order problem of crowdsourcing. Yet, once the decision to crowdsource has been made, the seeker must still decide whether to proceed internally with a proprietary platform, or to rely on the use of an open, external platform. This is the second order problem of crowdsourcing for which a theoretical analysis is offered in the present study. The conditions under which the use of an open, intermediary platform can be considered more appropriate than an exclusive, proprietary platform are analyzed. In particular, the role of transaction costs, network externalities and internal competencies are examined. Following this analysis, a decision-making model is proposed.

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