Title : Diversity of community members and communication between them : Effects on contest performance

Many studies show that open innovation contests are increasing in number and importance (Geiger et al., 2011; Kristensson, Gustafsson and Archer, 2004). However, we don? t have a good understanding of how these contests work in practice (Boudreau, Lacetera and Lakhani, 2011). Hence, in this paper we focus on how to attain performant open innovation contests. Which factors, besides the contest structure, should firm try to leverage in order to have performant contests? How much of the variance in the contest performance can be explained by community members related factors? Which variable is the best predictor of contest performance? Attending to these contest performance related issues is important because these contests are normally organized in the early stages of the open innovation process and the greater the number of good ideas, that the firm has in these initial phase, the better. If the open innovation contest is performant, then it increases the likelihood of getting number of good quality ideas, which ultimately increases the probability of producing novel goods or services. Addressing these questions empirically is challenging. In this paper, we analyze 173 contests, proprietary data provided by eYeka, an open innovation platform based in Paris. This unique data set provide us with the opportunity to study heterogeneous contests through similar measures. We formally test our hypotheses with a multiple regression model and simple slopes analysis. The main attribute of the existing studies is that importance is given to the contest structure, such as contest size (Boudreau, Lacetera and Lakhani, 2011), rewards (Bullinger et al., 2010), contest duration (Ebner et al., 2009), and problem description (Terwiesch and Xu, 2008) as potential factors impacting the contest performance. Our thesis is that the focus should also be on factors such as (a) skills diversity of participating community members (PCM), and (b) communication between PCM. Importance that is given to these two factors in the open innovation and team literature lacks in the context of open innovation contests. Moreover, in practice contest organizers juggle with these factors but there is no concrete idea as to how to use them to make contests performant. We have the three theoretical contributions, which are as follows: First, we empirically show that skills diversity has an inverted U-shaped relationship to contest performance. With this contribution we participate in the on going conversation in the open innovation search literature (Laursen and Salter, 2006) and suggest that even in the context of open innovation contest searching widely for ideas has a curvilinear relationship with performance. Second, we demonstrate through our analysis that communication amongst PCM has a positive impact on contest performance. This suggests that allowing for communication between PCM is productive for contest performance. Third, our analysis reveals that skills diversity of PCM moderates the relationship between communication amongst PCM and contest performance. This implies that the effects of communication amongst PCM are less positive under high diversity of PCM than under low diversity. Our managerial contributions are as follows: First, contest managers should control for skills diversity of PCM. Searching for external actors with very diverse skills can be counter-productive for the contest. Second, Managers should in general encourage communication. However, if during a contest, managers feel that the skills diversity level of PCM is getting high then control for the communication between PCM. If on the other hand, level of skills diversity of PCM is low certain level of communication can lead to positive impact on contest performance. In this article we argue that though the contest structural factors are very important they are however under full control of the contest managers (Yang, Chen and Pavlou, working paper) and (s)he will do everything to reduce any inefficiency caused by these factors. Our thesis is that the focus should also be on factors such as communication and diversity of PCM. The level of diversity of participating community members in a contest is only partially in control of contest manager. But depending on the level of diversity the communication between PCM can be manipulated to attain performant contest.