Rivalry and the Rules in Collective Problem‐Solving: Learning more about Open Innovation processes from the microeconomics of computer programing contests

Paul A. David, Stanford University and UNU-MERIT

If invention and innovation are conceptualized as problem-solving processes, “open innovation” refers
to a process in which commercially oriented holders of research and development problems seek the
help of problem-solvers who are external to their business organizations. When the terms of such
searches and the proffered rewards for an accepted solution do not restrict the information transactions
among the parties to strictly dyadic relations between the business enterprise and individual potential
problem-solvers, the arrangement has the potentiality to initiate the sponsored pursuit of “collective
discoveries and inventions”. One form that this has taken over a long stretch of recorded history is the
prize competition, and which recently has become the object of recrudescent popularity – drawing
revitalized interest from business corporations, non-profit foundations and government agencies, as the
most structured mode of “crowd-sourcing.” Seeking help from outside research resources in these ways
is no guarantee of success: organizational and procedural details will affect the motivations and may
shape the behaviors of the problem-solvers to whom the sponsoring firm has, in effect, “out-sourced”
the research. Yet, the externalization of the problem-solving process itself creates considerable
difficulties and costs of monitoring and learning about individual and collective behaviors of the
participating researchers. This may explain why, despite the widespread interest in sponsoring open
“prize competitions” to elicit better solutions to scientific, technological and social problems, only very
limited progress has been made in expanding the empirically grounded knowledge-base for designing
such competitions optimally within the constraints set by the character of the problem and the sponsor’s
aims and resources.
There are, however, some “open problem-solving environments” which are more susceptible to
detailed real-time monitoring and capture of data that may enable quantitative analysis of the microdynamics
of prize competitions. This paper focuses upon one such environment, specifically, an “online”
computer programming contest. We systematically explore the potential of the data generated by a
series of MatLab contests (held during 2004-2007) to provide unusually detailed insights concerning the
effects of contest design variations on the code submission efforts of the participants and the
improvements in code performance that they achieved. Special attention is directed to the effects of
alternative information access conditions under which participants were obliged to work, and
particularly to the effects of imposed phases of code revelation and free reuse of the solution algorithms
submitted by their competitors. The findings of the analysis is carried out at both the level of the
ensemble, and that of the individual participants in the sample of seven distinct but structurally identical
contests support the conclusion that the phase of enforced open access and permitted code sharing, i.e.,
“open science” conditions of cooperative rivalry, are conducive to greater rates of improvement in the
quality (performance) of the submitted solutions, and an elevated frequency of submissions.

About the speaker
Paul Allan David is Professor of Economics and Senior Fellow of the Institute for Economic Policy Research at Stanford University. He is Professor Emeritus of Economics and Economic History in the University of Oxford, Emeritus Fellow of All Souls College, Oxford and currently Senior Fellow of the Oxford Internet Institute. David is the author of more than 150 journal articles and contributions to edited volumes, as well as of the author and editor of several books including Technical Choice, Innovation and Economic Growth (1975) and The Economic Future in Historical Perspective (2003). He was among the pioneering practitioners of the "new economic history," and is known internationally for wide-ranging contributions in the fields of American economic history, economic and historical demography, and the economics of science and technology. Investigation of the conditions that give rise to ‘path dependence’—the persisting influence of historical events in micro and macro economic phenomena—is a recurring theme in his research. Two main areas of contemporary economic policy research have emerged in his work the past two decades: the evolution of information technology standards and network industries, and the influence of legal institutions and social norms upon the funding and conduct of scientific research in the public sector, and the interactions between that latter and private sector R&D. David currently leads an international research project on the organization, performance and viability of free and open source software. Many professional honors have been bestowed upon David in the course of his career, including election as Fellow of the International Econometrics Society (1975), Pitt Professor of American History and Institutions in the University of Cambridge, as Fellow of the American Academy of Arts and Sciences (1979), Vice-President, and President of the Economic History Association (1988-89), as Marshall Lecturer in the University of Cambridge.

Venue: Conference Room

Date: 13 June 2013

Time: 12:15 - 13:15  CEST