Contests are a historically important and increasingly popular mechanism for encouraging innovation. A central concern in designing innovation contests is how many competitors to admit. Using a unique data set of 9,661 software contests, we provide evidence of two coexisting and opposing forces that operate when the number of competitors increases. Greater rivalry reduces the incentives of all competitors in a contest to exert effort and make investments. At the same time, adding competitors increases the likelihood that at least one competitor will find an extreme-value solution. We show that the effort-reducing effect of greater rivalry dominates for less uncertain problems, whereas the effect on the extreme value prevails for more uncertain problems. Adding competitors thus systematically increases overall contest performance for high-uncertainty problems. We also find that higher uncertainty reduces the negative effect of added competitors on incentives. Thus, uncertainty and the nature of the problem should be explicitly considered in the design of innovation tournaments. We explore the implications of our findings for the theory and practice of innovation contests. This paper was accepted by Christian Terwiesch, operations management.innovation contests, uncertainty, innovation, problem solving, tournaments

Online contract labor globalizes traditionally local labor markets, with platforms that enable employers, most of whom are in high-income countries, to more easily outsource tasks to contractors, primarily located in low-income countries. This market is growing rapidly; we provide descriptive statistics from one of the leading platforms where the number of hours worked increased 55% from 2011 to 2012, with the 2012 total wage bill just over $360 million. We outline three lines of inquiry in this market setting that are central to the broader digitization research agenda: 1) How will the digitization of this market influence the distribution of economic activity (geographic distribution of work, income distribution, distribution of work across firm boundaries)?; 2) What is the magnitude and nature of information frictions in these digital market settings as reflected by user responses to market design features (allocation of visibility, investments in human capital acquisition, machine-aided recommendations)?; 3) How will the digitization of this market affect social welfare (increased efficiency in matching, production?)? We draw upon economic theory as well as evidence from empirical research on online contract labor markets and other related settings to motivate and contextualize this research agenda.

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