When Do Marketing Ideation Crowdsourcing Contests Create Shareholder Value? The Effect of Contest Design and Marketing Resource Factors

Abstract

Firms often use crowdsourcing contests to develop marketing ideas and solutions. Despite the prevalence—and unique aspects—of marketing ideation crowdsourcing contests (MICCs), there has been little examination of these contests’ shareholder wealth implications. Adopting a signaling perspective, the authors conduct an event study of 508 MICC announcements and find that they are associated with higher returns, but also higher idiosyncratic risk, indicating that investors hold a mixed view of such contests. Further, the authors consider how contest design factors and firm marketing resources may signal the cultivation of intellectual and relational market-based assets to shape their stock market impact, providing firms guidance to better design their MICCs. Specifically, they find that returns are enhanced when firms use professional (vs. general public) contests, specifically scoped contests, and contests using crowd judging (vs. expert panels), and for firms with stronger marketing capabilities. However, brand factors have mixed effects on returns, with a brand's relevant stature having a positive effect and its energized differentiation having a negative effect on returns. Product MICCs and generally scoped contests heighten the negative effects on risk, whereas marketing resources have no impact. Results offer implications for practitioners, including the finding that many MICC design choices commonly used in practice (i.e., general public contests and expert panels) are viewed less favorably by investors.