Firms pursuing an open innovation strategy have increasingly turned to individuals as sources of new ideas. Two main approaches are often highlighted. First, firms can use online innovation contests, where individuals submit ideas in competition for a prize. Second, firms can use firm-hosted online communities, drawing from collaborative efforts of individuals with more intrinsic motivations to participate. A central challenge in both cases is that firms often struggle to sustain participation and effort of participants on an on-going basis. A third hybrid approach, where firms establish community-based innovation contests, has been largely ignored by research, but seems to help firms to engage participants on an on-going basis. This study focuses on community-based innovation contests to understand how firms engage communities to participate in contest over time. I conducted fieldwork at two firms that have successfully run them for many years, Chicago-based T-Shirt firm Threadless and Phoenix-based automotive firm Local Motors. Over ninety interviews with firm employees and community members, over six months of on-site observation at the two firms’ headquarters as well as internal documents and blog data have been collected and analysed. Based on this data the core of the thesis consists of three empirical chapters that examine how firms are able to engage the communities to participate in their contests on a regular basis. First, it shows that the addition of a community to contests increases contestants’ opportunities to learn. In experiential learning, contests provide experience whereas the community provides room for reflection and learning. These learning opportunities motivate contestants to come back and create contest entries on an on-going basis. Secondly, taking a social identity perspective, the research shows how the firms are able to engage the community members continuously by creating a joint firm-community identity. Lastly, it explains how these firms are able to influence community members’ perception of the tasks they are doing through the contest design. Firms are able to turn activities that have been traditionally regarded as work into a recreational activity.

Um politische Ziele wie Wirtschaftswachstum, geringe Arbeitslosigkeit und langfristige internationale Wettbewerbsfähigkeit zu erreichen, wird die Förderung der nationalen Innovationstätigkeit als ein zentrales Element für erfolgreiche Wirtschaftspolitik angesehen. Diese Dissertation trägt zu der Diskussion über den Einfluss von regulativen und finanziellen Politikinstrumenten auf unternehmerische Entscheidungen bei, indem die Effekte von spezifischen Politikinstrumenten auf die individuelle Innovationstätigkeit und das Kooperationsverhalten analysiert werden. Es werden dabei die Effekte dreier Politikinstrumente – intellektuelle Eigentumsrechte, Innovationswettbewerbe und Subventionen – mit Hilfe von Laborexperimenten in einem neuen experimentellen Design untersucht, das im Kern eine Scrabble-ähnliche Wort-Suchaufgabe beinhaltet. Auf diese Weise können die individuellen Reaktionen auf die institutionellen Parameter im Rahmen eines sequentiellen Innovationsprozesses simuliert werden. Die Ergebnisse des ersten Experiments bezüglich intellektueller Eigentumsrechte zeigen, dass diese einen negativen Effekt auf das Auftreten sequentieller Innovationen haben. Die Wohlfahrt sinkt durch das Vorhandensein von intellektuellen Eigentumsrechten signifikant um 20 bis 30 Prozent, da eine geringere Anzahl und weniger wertvolle Innovationen erstellt werden. Im zweiten Experiment werden die Effekte von Innovationswettbewerben untersucht. Im Ergebnis sinkt in beiden untersuchten Wettbewerben die Kooperationsbereitschaft, jedoch haben Innovationswettbewerbe weder Einfluss auf die Kooperationsneigung der Individuen noch auf die gesamte Innovationsaktivität. Das dritte Experiment analysiert die Effekte von Subventionen auf das Innovationsverhalten und auf die Kooperationstätigkeit. Im Ergebnis zeigt sich ein substantielles Crowding-Out von privaten Investitionen und – je nach Subventionsart – keine positiven, bzw. sogar negative Effekte auf die Wohlfahrt. Im abschließenden Kapitel wird die aktuelle Literatur zur experimentellen Innovationsforschung zusammengefasst und ihre Vor- und Nachteile diskutiert. Insgesamt wird für eine pragmatische Nutzung von Laborexperimenten plädiert, um die Ergebnisse etablierter Methoden in der Innovationsforschung durch diesen methodischen Ansatz zu bereichern.

Organisations accept the fact that innovation is a crucial element in achieving long-term competitive advantage. The key business challenge, however, lies in acquiring the expertise and methodologies needed to effectively motivate, support and nurture innovation. South African companies in particular are performing poorly in developing effective reward strategies to encourage and motivate innovation. This research therefore investigates the critical success factors for rewarding and motivating innovation in the workplace. The results of this study should assist executive managers to formulate reward strategies to stimulate innovation. In line with qualitative research methodological principles, this study followed an exploratory approach to investigating the important factors in rewarding innovation. A total of 15 in-depth interviews were held with executive managers within the Financial Services sector. The sample represented a diverse group of highly successful business leaders, including General Managers (such as CEOs), Human Resource practitioners (such as HR directors) and Innovation Leaders (such as R&D leaders). Key findings reflect that a multi-faceted reward strategy is required to motivate innovation. This includes financial rewards, non-financial rewards, learning and development opportunities, as well as specific elements within the work environment. Leadership was found to be a critical success factor in the implementation of an effective total reward strategy. The research allowed for the development of a framework outlining the critical success factors for rewarding and motivating innovation in the workplace. This is believed to be a useful tool for senior managers who wish to develop a total reward strategy to increase the level of innovation within their organisations. This study also contributes to the body of academic knowledge by clarifying the relationship between innovation and the notion of total reward, which was identified as a gap in the literature. / Dissertation (MBA)--University of Pretoria, 2013. / ccgibs2014 / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted

My dissertation consists of four chapters. In the first chapter, I use a laboratory experiment to analyze how individuals resolve an exploration versus exploitation trade-off. The experiment implements a single-agent exponential bandit model. I find that, as predicted, subjects respond to changes in the prior belief, safe action, and discount factor. However, I commonly find that subjects give up on exploration earlier than predicted. I estimate a structural model that allows for risk aversion, base rate neglect/conservatism, and probability mis-weighting. I find support for risk aversion, conservatism, and probability mis-weighting as potential factors that influence subject behavior. Risk aversion appears to contribute to the finding that subjects explore less than predicted. <div><br></div><div>In the second chapter, I use a laboratory experiment to analyze how a group of voters experiment with a new reform. The experiment implements the continuous time Strulovici (2010) collective experimentation model. I analyze a subset of data where groups and single decision makers should eventually prefer to stop experimentation and abandon the reform. I find three results that are consistent with the modeled experimentation incentives. In this subset of data, groups stop experimentation earlier than single decision makers, wait longer to stop experimentation as the number of revealed winners increases, and stop experimentation earlier than the utilitarian optimum predicts. However, I also find that both groups and single decision makers stop experimentation earlier than predicted. Additional treatments show that this result is unlikely to be explained by standard explanations such as incorrect belief updating or risk aversion. </div><div><br></div><div>In the third chapter, I use a laboratory experiment to investigate the role of group size in an innovation contest. Subjects compete in a discrete time innovation contest, based on Halac et al. (2017), where subjects, at the start of each period, are informed of the aggregate number of innovation attempts. I compare two innovation contests, a two-person and four-person contest, that only differ by contest size and have the same probability of obtaining an innovation in equilibrium. The four-person contest results in more innovations and induces more aggregate innovation attempts than the two-person contest. However, there is some evidence that the two-person contest induces more innovation attempts from an individual than the four-person contest. Subjects' behavior is consistent with subjects placing more weight on their own failed innovation attempts, when updating their beliefs, than their competitors' failed innovation attempts.</div><div><br></div><div>In the fourth chapter, I investigate the role of performance feedback, in the form of a public leaderboard, in innovation competition that features sequential search activity and a range of possible innovation qualities. I find that in the subgame perfect equilibrium of contests with a fixed ending date (i.e., finite horizon), providing public performance feedback results in lower equilibrium effort and lower innovation quality. I conduct a controlled laboratory experiment to test the theoretical predictions and find that the experimental results largely support the theory. In addition, I investigate how individual characteristics affect competitive innovation activity. I find that risk aversion is a significant predictor of behavior both with and without leaderboard feedback and that the direction of this effect is consistent with the theoretical predictions.</div>

Diese Dissertation enthält vier Aufsätze zur Theorie der Anreizsetzung bei nicht-verifizierbaren Leistungsmaßen. Es werden positive Dominanzanalysen für Anreizmechanismen durchgeführt, die in realen wirtschaftlichen Situationen Anwendung finden. Der erste Aufsatz analysiert zwei Bonus-Wettbewerbe in Unternehmen. Der Prinzipal kann entweder einen Bonuspool festlegen, dessen Aufteilung von der Leistung der Agenten abhängt, oder bereits ex ante die Höhe der Boni fixieren. Eine höhere Präzision der Leistungsmessung führt nur im zweiten Fall zu stärkeren Anreizen. Die optimale Wahl des Wettbewerbs hängt von den Präferenzen der Agenten, ihren Liquiditätsbeschränkungen und den Kosten der Leistungsmessung ab. Der zweite Aufsatz untersucht die optimale Zuordnung von Aufgaben auf Stellen wenn relationale Verträge basierend auf subjektiven Leistungsmaßen explizite Anreizverträge ergänzen können. Die Spaltung von Aufgaben ist optimal, wenn die glaubhafte Bindung an relationale Verträge nicht möglich ist. Dagegen sollten Aufgaben immer dann gebündelt werden, wenn relationale Verträge bereits bestehen. Im dritten Aufsatz möchte ein Käufer eine Innovation erwerben. Um qualitätssteigernde Investitionen bei potentiellen Anbietern zu induzieren, kann der Käufer entweder einen fixen Preis ausschreiben oder einen Auktionsmechanismus nutzen. Obwohl Investitionen unter der Auktion immer höher sind, bevorzugt der Käufer einen fixen Preis wenn die Grenzkosten der Qualitätsmessung hoch sind oder die Produktionstechnologie starken Zufallseinflüssen unterliegt. Im letzten Aufsatz möchte ein Prinzipal das Produktionsergebnis zweier Agenten maximieren, die vor der Produktion in eine kostenreduzierende Innovation investieren können. Dabei kommt es zu Spillover-Effekten. Bei einer allgemeinen Preissubvention sind Investitionen stets zu gering, während ein Innovationswettbewerb zu Unter- und Überinvestitionen führen kann. Der Prinzipal bevorzugt eine Preissubvention bei starken Spillover-Effekten. / This thesis consists of four self-contained essays that compare real-world incentive schemes used to mitigate moral hazard problems under non-verifiable performance. The first essay contrasts the impact of the precision of performance measurement on wage costs in U- and J-type tournaments. In U-type tournaments prizes are fixed. In J-type tournaments only an overall wage sum is specified. The principal prefers a U-type tournament if workers receive a rent under limited liability and the costs of increasing precision are low. However, if workers are inequity-averse and have unlimited liability, the J-type tournament leads to lower wage costs. The second essay analyzes optimal job design when there is only one contractible and imperfect performance measure for all tasks whose contribution to firm value is non-verifiable. Task splitting is optimal when relational contracts based on firm value are not feasible. By contrast, if an agent who performs a given set of tasks receives an implicit bonus, the principal always benefits from assigning an additional task to this agent. The third essay compares an auction and a tournament in a procurement setting with non-contractible quality signals. Signals are affected by firms' non-observable investments in R&D and the procurer's precision of quality measurement. Although investments are always higher with the auction, the procurer may prefer the tournament if marginal costs of quality measurement are high or the production technology for quality is highly random. In the last essay, a principal wants to induce two agents to produce an output. Agents can undertake non-contractible investments to reduce production cost of the output. Part of this "innovation" spills over and also reduces production cost of the other agent. Agents always underinvest with a general output price subsidy, while they may or may not do so with an innovation tournament. Strong spillovers tend to favor a general output price subsidy.