“Hofstetter et al. (2017) ran an experiment by inviting a cohort of innovators to participate in two successive contests and randomly varied the incentive structure. Half of the participants were allocated into winner-take-all contests, and the other half into contests with a multiple prize structure in which the top 20 innovators would receive a prize (the total prize being identical across groups). The winner-take-all contests yielded significantly better ideas compared to multiple prizes in the first round. However, this result flipped when the innovators were asked to participate again in the second contest. While 50% of those in the multiple-prize contest group chose to participate again, only 37% did so from the winner-take-all group. Moreover, innovators who had received no reward in the first contest showed significantly lower effort in the second contest and generated fewer ideas. In the second contest, the multiple prizes contest generated better ideas than the winner-take-all contest. Confirming these findings, the authors found similar effects in an empirical investigation of over 260 contests and 6,000 innovators from the open innovation platform Atizo.com. Most importantly, these data show that innovator churn could be reduced by the addition of more (albeit smaller average) rewards.”
Thanks for writing this post! It seems really valuable. I also think it relates in interesting ways to a different recent post: How effective are prizes at spurring innovation?
One thing that stood out to me (emphasis mine):
“Hofstetter et al. (2017) ran an experiment by inviting a cohort of innovators to participate in two successive contests and randomly varied the incentive structure. Half of the participants were allocated into winner-take-all contests, and the other half into contests with a multiple prize structure in which the top 20 innovators would receive a prize (the total prize being identical across groups). The winner-take-all contests yielded significantly better ideas compared to multiple prizes in the first round. However, this result flipped when the innovators were asked to participate again in the second contest. While 50% of those in the multiple-prize contest group chose to participate again, only 37% did so from the winner-take-all group. Moreover, innovators who had received no reward in the first contest showed significantly lower effort in the second contest and generated fewer ideas. In the second contest, the multiple prizes contest generated better ideas than the winner-take-all contest. Confirming these findings, the authors found similar effects in an empirical investigation of over 260 contests and 6,000 innovators from the open innovation platform Atizo.com. Most importantly, these data show that innovator churn could be reduced by the addition of more (albeit smaller average) rewards.”