Paper to be presented at the DIME-DRUID ACADEMY Winter Conference 2011 on Comwell Rebild Bakker, Aalborg, Denmark, January 20 - 22, 2011 MOTIVATION, REWARD SIZE AND CONTRIBUTION IN IDEA CROWDSOURCING Oguz Ali Acar Rotterdam School of Management oaliacar@rsm.nl Jan van den Ende Rotterdam School of Management jende@rsm.nl Abstract: Motivation, Reward Size and Contribution in Idea Crowdsourcing Oguz Ali Acar, Rotterdam School of Management (PhD Candidate since 2009, expected final date 2013, oaliacar@rsm.nl) In this paper we address a recently emerged form of open innovation and online communities called crowdsourcing. It refers to collecting ideas and solutions for innovation from the open market. The core advantage of crowdsourcing is expanding the boundaries of companies and enabling them to reach a knowledge or idea anywhere in the world. On the other hand, considering the huge amount of contributions, it is hard and costly to manage the process effectively and efficiently. Therefore, it is of importance to understand which factors affect the contribution of the crowd and how do they do so. Several studies focused on crowdsourcing by investigating the relative success of ideas (Poetz and Schreier, 2009), role of marginality (Jeppesen and Lakhani, 2009), multiagent problem solving (Terwiesch and Xu, 2008) and productivity (Huberman et al., 2009), however the effect of rewards on motivation and outcome is not investigated yet. To that end, in this project, we develop theory on the relationship between rewards, motivation of contributors and performance in crowdsourcing initiatives. In the psychology literature there is a perennial debate on the effects of rewards on motivation (e.g. Deci et al., 1999: Eisenberger and Cameron, 1996). While authors participating in that debate have distinguished between intrinsic and extrinsic motivation as the main components of motivation, we build on recent theory in psychology to develop a more fine grained analysis. We distinguish between contextual and situational levels of intrinsic and extrinsic motivation. Situational motivation refers to the reason of an action when a person is performing an activity while contextual motivation reflects the motivation to a certain context (Vallerand, 1997). We hold that behavior in crowdsourcing communities is primarily affected by situational motivation, which in turn is influenced by both contextual motivation and reward presence/absence and size. We distinguish between different characteristics of outcome (i.e. quantity, usefulness and novelty) and link situational intrinsic motivation with quantity and novelty of contributions and situational extrinsic motivation with the criteria set for receiving the reward. Our conceptual model offers the most comprehensive model developed for reward, motivation and contribution relationships so far and it contributes to the motivation and online communities literatures in several ways. First of all, our study is first to demonstrate the effects of reward size on intrinsic motivation as well as being first to show these effects for the antecedents of intrinsic motivation. Secondly, our study sheds light on widely debated diminishing effects of rewards on intrinsic motivation. Third, distinguishing between the different hierarchical levels of motivation with respect to motivational orientation (i.e. intrinsic and extrinsic motivation) enables JEL - codes: O31, O32, O30

REWARD SIZE, MOTIVATION AND CONTRIBUTIONS IN IDEA CROWDSOURCING The literature on online communities has investigated motivations of contributors, but the effects of rewards on motivations and performance have hardly been addressed. In this study, we develop theory on the effects of reward size on motivation and performance of contributors. Performance refers to quantity, usefulness and novelty of contributions. By building on recent psychology literature, we distinguish between contextual and situational motivations. In this way, this paper contributes to both online communities and psychology literatures.

2 INTRODUCTION Recognition of the role of external sources in the innovation process is becoming increasingly prevalent in the past decade. External sources refer to customers, universities, suppliers, consultants, competitors, communities, etc.. One way of the involvement of external sources to innovation activities is opening up the front end of the innovation process to online communities. Thanks to the technical advantages and fast diffusion of internet, opening up to online communities allows companies to expand their boundaries and reach a solution anywhere in the world. On the other hand, the contributions received from online communities are often quality wise questionable and the number of contributions can be overwhelmingly high. Therefore, in order to harness the benefits of online communities, management of these contributions is of importance. One of the most prevalent issues in this respect concerns the effects of rewards. Given the importance of rewards as a tool to control people���s behavior (Frey and Jegen, 2001), it is of significance to understand the role of rewards in online communities. Little is known about the effects of rewards on contributions in online communities for innovation related activities. Though many studies investigated what motivates people in online communities (e.g. Kollock, 1999 Lakhani and von Hippel, 2003), no one, to our best knowledge, has investigated how rewards affect these motivations in online communities. An exception is Borst and Van den Ende (2010) who investigated the effects of absence and presence of rewards on motivations and performance, but they only compared two reward situations. In addition, they did not address the effects of reward size. Moreover, the literature on motivations does not show consensus regarding the behavioral consequences (i.e. quantity, usefulness and novelty of contributions) of motivations. To exemplify, different studies offered positive, neutral or negative effect of extrinsic motivation on quantity (e.g. Borst and Van den

3 Ende, 2010 Shah, 2006 Wasko and Faraj, 2005). This inconsistency might be due to the fact that most authors do not account for the presence, absence or size of rewards. This research takes a step toward filling the gap in the literature regarding the role of reward size in online communities by developing theory on the relationship between reward size, motivation and contributions. Furthermore, it aims to shed light on the behavioral consequences of intrinsic and extrinsic motivation which, as pointed out above, created debate in online communities literature. A respectable number of psychologists and economists investigated the effect of rewards on motivation and voluntary behavior in offline contexts. Economics literature suggested a positive effect of rewards on motivation and behavior (Benabou and Tirole, 2003). On the other hand, findings in psychology literature on motivations are more controversial. One stream of researchers advocate negative effects of rewards on intrinsic motivation (e.g. Deci et al., 1999 Lepper, Greene, and Nisbett, 1973) whereas the other stream claim differing effects of rewards on intrinsic motivation (e.g. Cameron and Pierce, 1994 Eisenberger and Cameron, 1996). Though the role of many dimensions (e.g. contingency, being expected) of rewards investigated with respect to rewards intrinsic motivation relationship (e.g. Deci et al., 1999), reward size have hardly been addressed in the psychology literature. We contribute to psychology literature by addressing this dimension of rewards. In addition, we distinguish between contextual and situational levels of motivation and take these levels into account in rewards-motivation relationships. This way, we also address the perennial debate on the effects of rewards on intrinsic motivation in the psychology literature.

4 In this project, by building on recent psychology literature, a fine-grained conceptual model is developed for reward, motivation and contributions relationships in crowdsourcing communities. By doing so we contribute to online communities and psychology literatures in several ways. The paper is structured as follows: we will first give an overview of online communities literature and psychology literature on rewards and motivation along with the gaps that we will address. Next, our conceptual model and hypotheses will be explained in detail. Finally, in the discussion section, we will present scientific contributions and managerial implications of our conceptual model as well as potential directions for future research. THEORETICAL BACKGROUND Online Communities in the Innovation Processes As communities proved to be an important asset and channel of innovation for companies, various scholars investigated both internal and external communities and their role for companies. The communities of practice literature has focused on internal communities in organizations and suggested that huge amounts of learning and innovation occur while getting the job done in informal communities (e.g. Brown and Duguid, 1991). Moreover, open models of innovation widely suggested the usage of external parties as well as communities, including online communities, in order to achieve important benefits such as diversified and better fitting products, increase in created user value and stimulated adoption and network effects (e.g. Boudreau, 2006 Chesbrough, 2003 Shapiro and Varian, 1999). Scholars have investigated online communities in different domains such as open source software (e.g. Lakhani and von Hippel, 2003 Lee and Cole, 2003), sports related consumer products (Franke and Shah, 2003), video games (Jeppesen and Molin, 2003), automobiles (Franz, 2005), personal computers (Freiberger and Swaine, 2000) and librarians (Morrison et