Incentives and Stars: Competition in Innovation Contests with Participant and Submission Visibility

Abstract

Online innovation contests in which all current and potential contestants can view the identities of participating contestants and their submissions have become a popular format. Contestants who enter such a contest earlier than other contestants must weigh the potential costs of revealing their identities and submissions against the potential benefits of improving their submissions through emerging information and early engagement. In this study, we examine how top‐ranked contestants or stars, who rank in the top 5% of winning experience on the contest platform, react to the contest incentives in deciding when to begin observable participation in such an innovation contest. Subsequently, we examine how endogenous entry by top‐ranked contestants influences participation of future contestants. Our analysis, based on detailed data from contests and participating contestants from a popular graphic design platform, indicates that contest incentives have interesting second‐order effects on competition. Although top‐ranked contestants enter a focal contest earlier than other contestants when the prize is high relative to other available contests, early entry by top‐ranked contestants deters new contestants from entering a contest and reduces participation of those who do enter. Furthermore, the contestants who enter a focal contest following early entry by a top‐ranked contestant tend to have lower levels of prior success on the platform. This research has important implications for how the design of contests, where a contestant's identity and submissions are visible, can be modified to encourage greater competition and participation by all contestants.