Firms seek innovation solutions from external sources such as individuals, consumers and universities. It is critical for these firms to motivate external innovators to deliver high quality innovations. Online freelancer platforms work as an important channels for firms to find suitable freelancers to solve their problems. Some leading freelance platforms use contest to match freelancers with employers. In this research, we demonstrate that freelancers exhibit free-riding behavior in open contests where competing submissions are observable. Freelancers borrow ideas from others' submissions and implement these ideas in their own designs. The behavior is identified empirically using data collected from a leading freelance platform. It can be shown that free-riding behavior may ha...[ Read more ]

Firms seek innovation solutions from external sources such as individuals, consumers and universities. It is critical for these firms to motivate external innovators to deliver high quality innovations. Online freelancer platforms work as an important channels for firms to find suitable freelancers to solve their problems. Some leading freelance platforms use contest to match freelancers with employers. In this research, we demonstrate that freelancers exhibit free-riding behavior in open contests where competing submissions are observable. Freelancers borrow ideas from others' submissions and implement these ideas in their own designs. The behavior is identified empirically using data collected from a leading freelance platform. It can be shown that free-riding behavior may harm a freelancer's incentive by discouraging freelancers to enter contests late and submit fewer designs. On the other hand, we also find that employer's feedback provision may improve a freelancer's incentive and alleviate the negative effect of free-riding behavior on incentive. In addition, submission ratings in open contests are significantly higher, indicating that employers are more likely to get satisfactory outcomes in open contests. This finding could explain why some leading freelance platforms favor open contests on their platforms.