Management Decision

Fair play: Perceived fairness in crowdsourcing competitions and the customer

relationship-related consequences
Rita Faullant, Johann Fueller, Katja Hutter,
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competitions and the customer relationship-related consequences", Management Decision, Vol. 55
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MD
55,9 Fair play
Perceived fairness in crowdsourcing
competitions and the customer
1924
relationship-related consequences
Rita Faullant
Received 8 February 2017 Centre for Integrative Innovation Management,
Revised 11 July 2017
Downloaded by eFADA of Ankabut UAE, Mr Muhammad Suhail At 15:49 12 October 2017 (PT)

Accepted 13 August 2017 Institute for Marketing and Management, University of Southern Denmark,
Odense, Denmark and
Alpen-Adria-Universitat Klagenfurt, Klagenfurt, Austria
Johann Fueller
University of Innsbruck, Innsbruck, Austria, and
Katja Hutter
University of Salzburg, Salzburg, Austria

Abstract
Purpose Companies are discovering the power of crowdsourcing as a source of new ideas for products and
services. It is assumed that the personal engagement and the continuous involvement with a companys
products or services over a period of several weeks positively affect participants loyalty intentions toward
the host companies. The research leads the authors to challenge this assumption. In addition to mere
participation in crowdsourcing initiatives, the authors argue that perceptions of fairness will explain changes
in customer relationship-related consequences such as loyalty, perceived innovativeness and product interest.
The paper aims to discuss these issues.
Design/methodology/approach The authors analyzed a real-life crowdsourcing contest launched by a
leading lighting manufacturer and investigated the impact of two fairness dimensions (distributive and
procedural) on participants future behavioral and attitudinal intentions (n 121). The analysis was
performed with SEM.
Findings The results suggest that fairness perceptions are significantly related to evoked product interest,
perceived innovativeness and loyalty intentions. The analysis reveals that the influence of the fairness
dimensions is asymmetric: while distributive fairness can be considered as a basic factor that must be fulfilled
in order to avoid negative behavioral consequences, procedural fairness instead is an excitement factor that
causes truly positive behavioral consequences.
Research limitations/implications The results are particularly relevant for companies launching a
crowdsourcing competition under their own brand name, and for broadcasting platforms. For companies with
no relations to end-users, these findings may not be as relevant.
Practical implications Organizers of crowdsourcing contests should be aware that such initiatives
can be a double-edged sword. Fair Play is a must to gain the positive effects from crowdsourcing
initiatives for both new product development and the customer relationship. For companies lacking the
capabilities to manage crowdsourcing initiatives professionally it is advisable to rely on intermediary
broadcasting platforms.
Originality/value The research is the first to investigate systematically the consequences of fairness
perceptions in a real-life crowdsourcing idea contest. The authors demonstrate the asymmetric nature of
fairness perceptions on three different outcome variables that are important for the customer relationship.
Keywords Crowdsourcing, Co-creation, Procedural fairness, Customer relationship, Distributive fairness
Paper type Research paper

Rita Faullant, Johann Fueller and Katja Hutter. Published by Emerald Publishing Limited.
Management Decision This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may
Vol. 55 No. 9, 2017
pp. 1924-1941 reproduce, distribute, translate and create derivative works of this article ( for both commercial and
Emerald Publishing Limited non-commercial purposes), subject to full attribution to the original publication and authors. The full
0025-1747
DOI 10.1108/MD-02-2017-0116 terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
 Introduction Fair play
Skyrocketing customer participation and engagement in crowdsourcing contests is shifting
the focus of corporate marketing and innovation activities. Through connectivity and
interaction, companies are using online platform technologies to outsource the ideation
efforts to a worldwide pool of talented people (Terwiesch and Xu, 2008). On the basis of
current literature studies the landscape of crowdsourcing approaches may seem astounding.
Crowd contests, collaborative communities, crowd complementors, labor markets, 1925
innovation events, integrator platforms, two-sided platforms or marketplaces are distinct
forms with each suited to a specific kind of challenge or task (Boudreau and Lakhani, 2013;
Bernhardt et al., 2016; Kohler, 2015). Above and beyond various technical distinctions,
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crowdsourcing tool characteristics generally vary in terms of compensation (monetary or

non-monetary), the method of participation and interaction (collaborative or competitive),
the time frame (temporary or ongoing) and the platform host (company-owned or
intermediary platforms) (Howe, 2008; Schenk and Guittard, 2011; Vukovic, 2009;
Bernhardt et al., 2016; Kohler, 2015). We focus on company-owned crowdsourcing
contests, where participants self-select to work on their own solutions and compete to win
an offered prize for the best solution within a certain time period ( Jeppesen and
Lakhani, 2010; Terwiesch and Xu, 2008). Besides contributing their own ideas, participants
are often allowed to comment on other contributions, exchange ideas, ask questions and
give feedback to other participants. When companies decide to launch their own
crowdsourcing initiative, as a hosting organization they can directly engage with consumers
and users, and generate valuable outcomes that go beyond receiving innovative ideas or
designs (Kozinets et al., 2008). For example, such company-owned crowdsourcing activities
can create collective commitment toward new offerings (Nambisan and Baron, 2007), higher
commercialization capabilities (Poetz and Schreier, 2012), large scale consumer-to-consumer
as well as consumer-to-brand interaction, dissemination of online word-of-mouth (WOM)
communication (Kozinets et al., 2010; Zwass, 2010) as well as brand loyalty (Malthouse et al.,
2013). The basic argument put forward is that crowdsourcing initiatives provide individuals
with opportunities for ongoing involvement and personal engagement with a company and
its products or services over several weeks. While developing and cracking the challenge for
the sponsor (the company) the crowdsourcing activity strengthens the relationship between
the hosting company and the crowdsourcing participants thereby also increasing loyalty
intentions (Nambisan and Baron, 2007; Kozinets et al., 2010).
However, increased openness and collaboration also conceals risks (Gatzweiler et al.,
2013, 2017), and may in contrast to the positive effects cause frustration and other negative
feelings among loyal participants (Roehm and Tybout, 2006; Ward and Ostrom, 2006).
Recent examples from well-known companies like Moleskine and Henkel illustrate such
situations, as these announced crowdsourcing contests ended in embarrassing public
disasters that undermined brand loyalty and corporate image. The Moleskine Facebook
(FB) page received hundreds of negative comments from designers, fans and customers who
expressed their disappointment and disagreement with the Moleskine incentive scheme,
which awarded only the winner with a cash prize. In the case of Henkel, engaged
participants disagreed with the jury decision and the selected winners of the crowdsourcing
competition and felt overruled (Salt, 2011; Breithut, 2011). Henkel had to face a long-lasting
PR debacle which included negative reports in the most popular online newspapers in
Germany including www.spiegel.de (Breithut, 2011), zeit.de (Sawall, 2011), and focus.de
(Frickel, 2011).
These anecdotal episodes suggest that in addition to incentives, crowdsourcing
participants also care about fairness; and conflicts may arise due to perceived unfair
treatment. Perceived unfairness in crowdsourcing contests may result from unfair prize
allocations, nontransparent jury decisions, unfriendly climate and intolerable
 MD communication behavior (Franke et al., 2013; Gebauer et al., 2013). However, crowdsourcing
55,9 literature reveals little about how perceived fairness or unfairness may influence the quality
of participants relationships toward the hosting organization. In an experimental study,
Franke et al. (2013) show that negative fairness anticipation may prevent people from
participating in crowdsourcing events right from the outset, but their research does not
address the consequences of participants de facto perceived fairness judgments within a
1926 real-life crowdsourcing contest.
We investigate how participants perceptions of distributive and procedural fairness
affect their opinion of and subsequent loyalty change related to the hosting companys
perceived innovativeness and evoked product interest. This study makes two substantial
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contributions to the marketing and innovation literatures. First, it increases our collective
understanding about the conditions under which crowdsourcing can serve as a customer
relationship-building tool that will foster loyalty intentions and other favorable behavioral
consequences. And second, our examination of the asymmetric effects of distributive and
procedural fairness on participant opinion and loyalty-related behavioral intentions sheds
light on their factor structure. With our analysis, we offer a differentiated picture of each
dimensions factor structure and we demonstrate that the two fairness dimensions have
asymmetric impacts on behavioral consequences.

Theoretical background
Crowdsourcing contests from a relationship management perspective
The primary reason for launching a crowdsourcing contest is in most cases to search for
novel and outstanding solutions to new product development problems. When managed
successfully, crowdsourcing contests might also have important positive side effects,
described in the following.
Loyalty intentions. Loyalty intentions are a significant indicator of the quality of a customer
relationship. Loyalty encompasses both an attitudinal component, reflecting what an
individual thinks and feels about a firm, and a behavioral component, comprising the actions a
person is disposed to undertake in response to an interaction with a company (Mittal and
Kamakura, 2001). Positive behavioral responses include repurchase, positive WOM, and other
supporting activities that result in higher rates of return for the firm (e.g. Anderson et al., 2004;
Rust and Zahornik, 1993; Srivastava et al., 1998; Zeithaml et al., 1996). The participation of
users in company sponsored crowdsourcing contests may increase their loyalty intentions
through their close interaction with the firm. After enrolling in a crowdsourcing contest,
participants become deeply involved with a company and its products over a period of several
weeks. They devote time, skills and personal engagement to developing new ideas for the
company. Users identify themselves as part of the community and form intense relationships
with it (Bagozzi and Dholakia, 2006), and they often become passionate about the brand or
product (McWilliam, 2000; McAlexander et al., 2002). Crowdsourcing contests therefore
strengthen the community members relationships toward the host company (Porter and
Donthu, 2008) and also their relationships toward the products they have helped design
(Franke et al., 2010).
Evoked product interest. As users who co-create and co-design new products for certain
companies become familiar with a project, they may become interested in and attached to
the product at the same time (Belk, 1988). We define evoked product interest as interest in
a product that evolves while co-creating or co-designing a product. Evoked product
interest may be related to information about the product (e.g. the whereabouts of the
virtual product, its further development and market launch) or to the product itself
(e.g. how the new product and its technology work, how it can be used, and where it can be
purchased). Furthermore, consumers interest is not restricted to finding out information
 about the product they have co-created; they are interested in owning it and Fair play
recommending it to others. By engaging in crowdsourcing contest activities,
consumers initiate a relationship with their new product even before it physically
exists (Schlosser, 2003).
Perceived innovativeness. Consumers evaluate the firm and its products on their
innovativeness, i.e. how well a company is able to supply its customers with innovative
products (Brown and Dacin, 1997; Deshpande et al., 1993). Firm innovativeness strongly 1927
relies on a firms ability and the will to identify, analyze, understand and answer user
needs, and it is seen as a driver of economic success. Some studies emphasize on the link
between perceived innovativeness and participation in value co-creation activities
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(Schreier et al., 2012; Nambisan and Baron, 2007; Nambisan and Nambisan, 2008).
The creation of virtual customer environments allows organizations to transform one-way
customer interactions into mechanisms for collaborative innovation and impact
innovation outcomes such as time-to-market, new product or service quality, or
innovation cost (Nambisan and Baron, 2009; Prahalad and Krishnan, 2008).
In sum, crowdsourcing contests serving the purpose of co-innovating with external
stakeholders can be considered as an ideal tool for strengthening the relationship
between the hosting (sponsoring) organization and its customers and users by providing
them with opportunities to actively shape the firms future developments (Fuchs and
Schreier, 2011). While at first sight, crowdsourcing contests can be seen to create a
number of positive effects for the hosting organizations in terms of new product
development and customer relationship management, the examples in our introductory
statement provide evidence that the causal relationship between crowdsourcing contests
and positive outcomes is not as straightforward as it might seem. In the following section,
we will discuss the perceived fairness in crowdsourcing contests, and how fairness affects
behavioral consequences.

The perceived fairness of crowdsourcing contests

Fairness, or justice, which has become an increasingly important issue over the past three
decades, has its foundations in social psychology. Fairness and justice are closely related
terms that are often used interchangeably (e.g. Boiney, 1995). Justice is used with reference
to standards of rightness and is seen as the moral fabric that binds together societies.
The term fairness on the other hand is used with regard to the ability to make unbiased,
concrete and specific judgements to a particular case without referring to ones own feelings.
It is therefore we adopt the term fairness in the following, as the fair and unbiased treatment
of crowdsourcing participants is in the focus of our paper. Fairness is essential for the
success of an online crowdsourcing contest, since fairness is important for ensuring
participation (Boiney, 1995). As seen in the examples pointed out in the introduction
crowdsourcing participants expect a fair level of reward as well as a fair selecting of the
best submission and winner of the contest. Unfair treatment can lead to reduced
future participation, to no participation at all, or to migration to other contests. Scholars
(e.g. Gilliland, 1993) frequently make a distinction between two dimensions in fairness
perceptions: distributive and procedural fairness.
Distributive fairness focuses on the equity principle, by which an individual considers
an exchange fair if his or her input/output ratio from the exchange is seen as fair when
compared with the input/output ratio of a referent other (Adams, 1965). Issues involving
distributive justice exist throughout society in all situations where individuals or groups
enter into exchange (Deutsch, 1985). A lack of distributive justice may cause negative
emotions (Weiss et al., 1999) and determines actual behavior, leading to reduced effort or
withdrawal. In crowdsourcing contests, distributive justice is reflected in the amount and
 MD the distribution of prizes. If participants consider the compensation of their efforts as not
55,9 fair (e.g. because the prizes set out to win are perceived as too low), this may result in poor
quality of submitted ideas, lower engagement, migration to other contests, or withdrawal.
This was exactly the case when the notebook brand Moleskine launched a logo design
contest and hundreds of designers and fans expressed their disagreement with the
incentive scheme, because the winner would receive a monetary prize but Moleskine
1928 would retain copyright privileges to all submitted logos (Moleskine, 2011b). Design
freelancers and Moleskine customers discussed their anger and explained that their
refusal to participate was due to their perception that Moleskine had created a misleading
input/output ratio and thereby a violation of distributive fairness (Moleskine, 2011a).
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While distributive fairness primarily focuses on outcomes and the results of reward
allocation, another important determinant of perceived justice is the process by which
allocations are made.
Procedural fairness is defined as the perceived fairness of the procedures, policies, and
criteria used by decision makers in arriving at an output allocation (Lind, 1988;
Thibaut and Walker, 1975; Leventhal, 1980). Allocation procedures should be consistent
across individuals over time (the consistency rule); decision makers personal self-interest
should be prevented (the bias suppression rule); and the allocation process should be
based on good information (the accuracy rule). In addition, allocation procedures should
reflect the needs, values and outlooks of all parties affected by an allocation process
(representativeness); they should be compatible with fundamental moral and ethical
values of the perceivers (the ethical rule); and they should allow for the possibility of
unfair decisions being rectified (the correctability rule) (Leventhal, 1980). When a person
perceives the process leading to a particular outcome as unfair, his or her reactions will
be directed at the organization as a whole rather than at the specific tasks. This is of
paramount importance, and may explain the reasons for the protest activities in the
following crowdsourcing example. The design contest for Pril a well-known
dishwashing detergent owned by Henkel in Germany faced serious procedural fairness
issues when it changed the terms and conditions in the middle of a contest to prevent
popular but crazy and unexpected designs like chicken-flavored Pril from becoming
the winner (Breithut, 2011). Participants felt overruled and did not agree with the jury
decision and the selected winners as a satisfactory outcome of the crowdsourcing project.
They engaged in active resistance and voiced their dissatisfaction on the corporate Pril
Facebook Page and on private Twitter accounts.
We establish the influence of fairness perceptions on post-contest behavior based on
social exchange theory (Homans, 1958; Blau, 1964), which is closely related to the study of
fairness and which posits that individuals will maintain relationships as long as
reciprocity is preserved, i.e. as long as they get back something in return for what they
have given. The object of exchange can be monetary as well as non-monetary.
Indeed, abundant literature on the motivation of crowdsourcing participants indicates a
wide variety of motives to explain why people contribute and what they get back
for their participation: motivations range from purely extrinsic (i.e. winning the prize) to
intrinsic (e.g., fun and joy in the task itself ), as well as to socializing with others
(e.g. Fller, 2010). Baldwin and Hippel (2011, p. 1411) describe a symbiotic relationship
between the firm and external contributors showing complementary motives and the
fulfillment of their own net utility: a misleading input/output ratio in terms of perceived
distributive fairness in crowdsourcing contests violates the rule of reciprocity in material
aspects; and violations of procedural fairness concern the ideals and intangible values of
such a symbiotic relationship. We therefore expect that both violations of distributive
and procedural fairness will lead to unfavorable attitudes toward the emitting company.
As a result participants may show reduced interest in future products, hold less favorable
 loyalty intentions, and perceive the firm as less innovative and customer-orientated. Fair play
These considerations promote the following hypothesis:
H1. Perceived distributive fairness positively impacts (a) the evoked interest in the
designed products and (b) perceived innovativeness of the company; and it will lead
to loyalty intentions in terms of (c) a positive change in participants loyalty toward
the company.
H2. Perceived procedural fairness positively impacts the (a) evoked interest in the designed 1929
products and (b) perceived innovativeness of the company; and will lead to loyalty
intentions in terms of (c) a positive change in participants loyalty toward the company.
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Asymmetric effects of fairness tracing the individual impact of the two fairness
dimensions. We argue that there may be asymmetric impacts of fairness components on
evoked product interest, perceived innovativeness and loyalty toward the hosting
organization. Human resource management, decision science, and consumer behavior
researchers have discussed issues of asymmetry in the relationship between variables.
For example, Herzberg et al. (1959) in his two-factor theory of job satisfaction distinguished
hygiene factors and motivators. Also in the customer satisfaction and consumer behavior
literature, the Kano-Model gained considerable relevance by contributing to an
understanding of how important single attributes of a product or service feature are for
overall satisfaction. In such models, product or service feature attributes are distinguished
into basic, hybrid and excitement factors depending on the effect on customer satisfaction
(Kano, 1984; Matzler et al., 1996). For our two fairness dimensions, we expect a similar
asymmetric factor structure, explained as follows.
Basic factors minimum level is needed: a fairness dimension will be classified as a basic
factor, if participants view it as fundamental to the crowdsourcing experience. In this case
there must be a minimally acceptable level, otherwise participants post-contest behavior
will decrease, along with their negative change of loyalty toward the organization. However,
exceeding this minimum level does not necessarily lead to a higher level of perceived
innovativeness, evoked product interest, nor increased loyalty change.
Hybrid factors the more the better: a fairness dimension can be classified as a hybrid
factor, if its impact on post-contest behavior is symmetric, i.e. it can entail both positive and
negative consequences. In other words, the higher the fairness components the higher
perceived innovativeness, evoked product interest, and increased potential for loyalty
change. These characteristics cause an equally strong negative effect when they are missing
from the crowdsourcing features.
Excitement factors positive impact if a certain level is reached: a fairness dimension is
classified as an excitement factor, if it will increase the loyalty change toward the
organization as well as post-contest behavior if a certain level is reached, but in case of
absence will not cause any damage.
According to these insights and approaching the idea of asymmetry, we also expect that
distributive and procedural fairness will have a different impact on perceived
innovativeness, evoked product interest and loyalty change. We expect distributive
fairness to be classified as a basic factor, i.e. this fairness dimension needs to be fulfilled in
order not to cause negative future behavioral consequences, but it does not necessarily lead
to positive post-contest behavior. Participants evaluate the input/output ratio before and
also during their participation and balance reasons to either contribute more time and effort
to generate creative ideas or to stop and migrate from the platform (Gebauer et al., 2013;
Franke et al., 2013). We further expect the procedural fairness dimension to be a hybrid
factor, i.e. if it is fulfilled a company can enjoy positive loyalty scores and other positive
post-contest behavior, if it is not fulfilled negative consequences has to be feared.
This argument can be deducted from the first studies on procedural fairness in court
 MD procedures, where the accused persons agreed more with the jury decision when they had
55,9 the impression that the procedure was fair, independent from the outcome. Depending on
the symmetric or asymmetric impact of fairness components we group them into basic and
hybrid factors, and make the following propositions (Figure 1):
H3a. Distributive fairness can be interpreted as a basic factor.
H3b. Procedural fairness can be interpreted as a hybrid factor.
1930

Empirical study
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The OSRAM design contest LED emotionalize your light

OSRAM, one of the worlds top lighting manufacturers, invited designers and creative
consumers from across the world to engage in an online crowdsourcing contest on new,
creative, LED lighting solutions. The contest was open to anyone with an interest in LED
technology, lighting solutions and related topics. The community consisted of many
ordinary users, architects, artists, engineers, professional and semi-professional designers
and design students from a variety of design disciplines. In total, more than 952 participants
took part in the OSRAM contest to display their creativity, to submit ideas, or to provide
feedback to their fellows via comments and evaluations. Overall, the contest elicited 576
ideas. The award winners were determined in a two-stage process: a pre-selection committee
(comprised of experts in light design and contest management) drew up a list of the
25 finalist ideas that had received high rankings in both user community and expert ratings.
The 25 ideas were then presented to the jury (OSRAM management + light and interior
design experts), which debated each idea in detail and awarded it between 1 and 5 stars.
The jury then announced the three award-winning designs to the community. Although the
winners received exclusively positive feedback from other community members in the form
of comments and messages posted on the contest platform after the announcement, in
emails to the contest organizing team, some users expressed frustration regarding the
selection (Figure 2).

The sample
All the participants were invited to set up a personal profile immediately after the
registration at the beginning of the contest. At this point, we assessed their loyalty attitudes
toward the launching company with a short questionnaire (loyalty t1). In order to track
changes in their loyalty perceptions we assessed loyalty with the identical items at a second
point in time, after the contest together with the main questionnaire. The main questionnaire
(including measures for loyalty t2) was then distributed at the end of the contest after the
jury decision was communicated to the OSRAM contest community. An email with a link to

Evoked product
H1a interest
Distributive
Fairness
H1b
H1c

H2a Perceived
innovativeness
H2b
Procedural
Fairness H2c

Figure 1.
Loyalty change
Hypothesis model
 Fair play

1931
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Figure 2.
The LED emotionalize
your light design
contest

our online questionnaire was sent out to all 952 participants that had initially registered for
the contest. For the main questionnaire, we received data from 132 participants. Cases with
excessive missing (more than 10% according to literature) were removed. We also deleted
cases with a completion time of less than 3 minutes. Once the data purification process was
completed, 121 cases remained for further analysis, a (purified) response rate of 13 percent.
The data for loyalty t1 was then matched with the data from the main questionnaire based
on the logfile user identifier. To test for a possible non-response bias, we compared the
means of early responders and late responders (Armstrong and Overton, 1977), finding no
significant differences. Thus, non-response bias did not seem to be a problem. We also
compared the survey sample to the total contest population of 952 participants about whom
we had received the personal demographic data supplied upon registration. As Table I
shows, there is no significant difference between our sample and the total population in
terms of gender, but survey participants were on average somewhat older than the average
contest participant (mean age 29 years vs 27 in the basic population).

Total contest population

Contest participants Survey participants
Min. Max. SD Median Median p

No. of ideas 0 29 2,89 1 2,00 ***

No. of votes 0 583 57,18 1,00 3,00 ns
No. of comments 0 929 60,45 0,00 1,00 ***
Age 73 11,35 27,00 29,00 **
Gender ns Table I.
Notes: **,***Significant at o0.000 and o0.01, respectively Sample comparison
 MD We also compared these groups according to their activity levels and found that the survey
55,9 participants were on average significantly more active than the overall population (median
comparison). Survey participants submitted significantly more ideas and comments on the
platform (median: 2 ideas vs 1 idea, 3 comments vs 1 comment), but did not differ
significantly in their voting levels (thumbs up or down). Summarizing, we may say that the
sample contains the more active and engaged participants.
1932
Measures
We drew up and refined the questions and items used in our quantitative online survey
based on the research literature. All items were assessed on a five-point rating scale where
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the end-points of the scale were labeled with strongly disagree and strongly agree.
We used the radio-button format with equal distances between the buttons which has been
found to enhance measurement reliability and legitimacy of parametric testing of such data
(Cook et al., 2001). Table II displays the wordings of all questions and refers to the literature
sources. As mentioned above, we assessed the loyalty items twice in an identical manner:
once, on participants registration at the start of the contest, and a second time, after the jury
decision. This allowed us to calculate a loyalty change score and report the actual change in
loyalty intentions over the duration of the contest. On average, we indeed see a slight
decrease in the loyalty scores across the sample (pre-loyalty 3.36 vs post-loyalty 3.08,
measured on a five-point scale from 1 low to 5 high).

Results
In a first step, we conducted confirmatory factor analysis and calculated the latent
constructs psychometric properties. The results are shown in Table II and indicate an
appropriate structure. All indicators have good factor loadings ( W0.6) and the respective
factor reliabilities all exceed 0.8, thereby passing the required reliability in structural
equation modeling of 0.6 (Bagozzi and Yi, 1988). A high variance extracted (W0.5) and
convergent validity are also fulfilled (Hair et al., 2006). Discriminant validity was assessed
by calculating the Fornell-Larcker ratio (Fornell and Larcker, 1981), the achieved value of
which must not exceed 1. All our constructs are well below this value and thus exhibit
discriminant validity. We account for common method bias through both ex-ante and
ex-post survey recommendations in literature (e.g. following Sea-Jin et al., 2010;
Podsakoff et al., 2003, 2012). In the study design stage we positioned dependent and
independent variables at different points in the questionnaire, and furthermore we assured
participants of their anonymity and that there are no wrong or right answers. For the scope
of our research question it was not possible to obtain the predictor and the criterion
variables from different sources (it had to be the same person), so we further conducted a
number of statistical ex post tests as recommended by Podsakoff et al. (2003). We ran the
CFA model with an additional common method-factor, which indicated that 0 percent
common variance was shared with the method factor. We further conducted the marker
variable test suggested by Lindell and Whitney (2001). We used perceived autonomy of the
task as a marker variable, and the common variance was 0.0009 percent. Finally, we also
calculated the difference in the standardized regression weights between the models with
and without the common method factor. If common method bias was a problem, the
standardized regression weights in the main model would have signified higher values than
in the model including the common method-factor. The differences for all regression weights
were 0, meaning that we received the exact same values in both models. All these results
suggest that common method bias was not a problem in our study.
To test our theoretical model, we applied structural equation modeling with AMOS 22.
We ran a maximum likelihood estimation, which yielded a satisfying overall fit for the
model (CMIN/DF 1.147). The non-significant p-value (0.125) indicates that our models
 Construct Item FL FR AVE F-LR
Fair play
Distributive fairness (Grewal and How fair are the prizes in the OSRAM Design 0.87 0.88 0.71 0.53
Baker, 1994) Contest?
The contest prizes for the winners in the 0.95
OSRAM Design Contest are appropriate
I consider the prizes as fair 0.70
Procedural fairness (Folger and The jury decision process was free from bias 0.89 0.90 0.69 0.54 1933
Konovsky, 1989; Colquitt, 2001) The jury decision process applied objective 0.83
standards so that decisions were made in a
consistent manner
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The jury decision process employed procedures 0.67

designed to provide useful feedback regarding
any decisions
The jury team dealt with the contest community 0.82
in an honest and truthful manner when making
decisions
Evoked product interest Garbarino My participation in the OSRAM Design Contest 0.80 0.58 0.51
and Johnson (1999) led me to the result that
I became interested in the lights designed by 0.75
the contest community
I want to be informed regarding the 0.79
development progress of the lights designed by
the contest community
I can imagine buying the lights designed by 0.75
the contest community as soon as they have
been realized
Perceived innovativeness Compared to other light manufacturers OSRAM 0.90 0.76 0.21
(Deshpande et al., 1993) is more innovative 0.88
is first-to-market with new products 0.90
is the leader of innovation 0.84
Loyalty changea Beatty and Kahle I will not use other lighting products if OSRAM 0.69 0.92 0.69 0.18
(1988), Zeithaml et al. (1996) lights are available (R)
I will recommend OSRAM lights to someone 0.88
who seeks my advice
I encourage friends and relatives to use OSRAM 0.83
lights
I will use OSRAM lights more often in the future 0.87
Table II.
OSRAM lights are my first choice 0.86 Wording and
Notes: FL, standardized factor loading; FR, factor reliability; AVE, average variance extracted; F-LR, psychometric
Fornell-Larcker ratio (discriminant validity); aloyalty change: the same items have been assessed before and properties of items
after contest participation; pre-participation scores were subtracted from post-participation scores and constructs

implied covariance structure does not differ significantly from that contained in the real
data, and thus our model depicts reality well. Accordingly, all other global and incremental
fit indices met the required thresholds suggested in the literature (e.g. see Hu and Bentler,
1999; Kline, 1998; Browne and Cudeck, 1993).
The path analysis (Table III) reveals that procedural fairness significantly influences evoked
product interest ( 0.35**) and perceived innovativeness ( 0.34**), but not loyalty change
( 0.16 ns). Distributive fairness on the other hand has a highly significant impact on product
interest ( 0.33**) but not on perceived innovativeness ( 0.01 ns) and loyalty change
( 0.12 ns). Together the two fairness dimensions explain 37 percent of the variance in evoked
product interest and 12 percent in perceived innovativeness. The results of the structural
equation model partly confirm our hypotheses. The main effect of the two fairness types on
loyalty change is not significant; therefore, H1c and H2c must be rejected, as well as H1b.
 MD Test of asymmetric effects
55,9 In H3a and H3b we proposed that the two fairness dimensions would be asymmetric in
nature and thereby have different impacts on the outcome variables, depending on their
level of fulfillment. To test this, we conducted a dichotomized type of regression analysis
with dummy variables in SPSS (Matzler and Sauerwein, 2002; Mittal et al., 1998). First, we
computed a single variable for each fairness dimension and for the criterion variables
1934 evoked product interest, perceived innovativeness, and loyalty change. This was done by
means computation of the variables included in the structural models (see Table II). Next, we
dichotomized the fairness dimensions (procedural fairness and distributive fairness), based
on tercile split, into high (upper tercile 1/rest 0) and low (lower tercile 1/rest 0) fairness
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variables in order to test which variable out of each dummy variable pair would have the
higher impact. If the high dummy variable of a dimension has a stronger effect than the low
one, the dimension is classified as an excitement factor, or vice versa, as a basic factor.
If both exert an equally strong influence on the outcome variable, the dimension will be
classified as a hybrid factor. Table IV summarizes the results of the multiple regression
analysis (SPSS), and the impact of distributive and procedural fairness on our three
post-contest related outcome variables. Distributive fairness is classified as a basic factor:
only the low-score variable exhibits a significant negative regression weight on evoked
product interest (0.409***) and loyalty change (0.265**) while the betas for the high-score
variable are not significant. H3a thus is confirmed. Procedural fairness on the other hand is
classified as an excitement factor: only the high-score variable shows significant regression
weights on evoked product interest (0.353**) and on loyalty change (0.355**). This stands
against our assumption that procedural fairness is a hybrid factor that would influence

Path p

Distributive fairness product interest 0.33 0.008

Distributive fairness perc. innovativeness 0.01 0.939
Distributive fairness loyalty change 0.12 0.326
Procedural fairness product interest 0.35 0.005
Table III. Procedural fairness perc. innovativeness 0.34 0.007
Results of the Procedural fairness loyalty change 0.16 0.204
path analysis Notes: CMIN/DF 1.147, p 0.125, GFI 0.884, TLI 0.984, CFI 0.987, RMSEA 0.035

Distributive fairness (median 2.5) Procedural fairness (median 2.33)

High Low High Low

Evoked product interest

0.095 0.409 0.353 0.155
Sig. (0.316) (0.000) (0.001) (0.135)
Interpret Basic factor Excitement factor
Perceived innovativeness
0.099 0.178 0.093 0.218
Sig. (0.341) (0.087) (0.406) (0.054)
Interpret ns by trend: basic ns by trend: basic
Loyalty change
Table IV. 0.038 0.265 0.355 0.022
Asymmetric effects Sig. (0.711) (0.010) (0.002) (0.840)
of fairness Interpret Basic factor Excitement factor
 post-contest behavior in both positive and negative directions. Instead, it is classified as an Fair play
excitement factor that leads to positive consequences if it is fulfilled, but not necessarily to
damage if not fulfilled. We therefore have to reformulate H3b. Obviously a fair, transparent
and bias-free procedure with honest feedback to the community regarding any decision
enlightens participants, and provides them with more than they would have expected.
For one of the outcome variables, perceived innovativeness, we do not find any asymmetric
effects, but remember the main effect in the path model showed a significant positive 1935
relationship between fairness and perceived innovativeness.
The analysis of asymmetric effects now further explains why the main effects in the path
model from distributive and procedural fairness on loyalty change were not significant.
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Here the asymmetric nature would have been hidden in the overall analysis. Instead, we
were able to reveal that a fair distribution of the rewards (distributive fairness) is a basic
requirement in order to not create frustration among participants and to not cause negative
changes in participants loyalty intentions toward the organization. If expectations of
distributive fairness are not fulfilled, a negative change in participants loyalty toward the
company must be expected; however, if expectations of distributive fairness are fulfilled, no
positive effect on participants loyalty intentions should be expected. For procedural
fairness, the situation is vice versa. If the hosting organization ensures a transparent,
objective and bias-free jury process a positive loyalty change toward the organization and
positive post-contest behavior can be expected.

Discussion and managerial implications

We sought to investigate the consequences of crowdsourcing contents on participants
future behavior. Previous studies have argued that, taken together, the ongoing
involvement and interaction over several weeks with a company and its products and
the personal engagement that occurs when developing new ideas for the company lead to
stronger and deeper relationships between the company and users (Nambisan and
Baron, 2007). We challenged these assumptions by pointing out the importance of
perceptions of fairness, and we integrating two distinct types of fairness procedural and
distributive fairness that are relevant for crowdsourcing initiatives in general and for
crowdsourcing contests in particular.
In the course of a real-life crowdsourcing contest, we find that not only anticipated
fairness expectations as argued by Franke et al. (2013), but actually perceived fairness
experiences during a contest significantly affect future behavioral intentions. Our findings
show that procedural fairness drives customers interest in products and positively affect
their perceived innovativeness of the company and the brand. Relating these findings to the
theory of value creation and in particular to the theory of trying (Xie et al., 2008),
participation in crowdsourcing contests is a form of co-creation through which participants
derive value. This value may reside in trying to demonstrate ones capabilities, but also in
the intrinsic value of the process of striving and just participating. Participation in
crowdsourcing contests is associated with risks and uncertainties that are not fully under
the participating individuals control. The managerial implications are straightforward:
Fairness presents an important parameter beyond the volitional control of users and
organizations need to grant fair surrounding conditions for participants to support their
intention to derive value from their co-creation activity.
The findings also highlight the distinction between procedural and distributive fairness,
showing asymmetrical effects on loyalty intentions and evoked product interest.
Our findings point out that distributive fairness may be considered as basic factor, which
causes frustration, and negative consequences if certain thresholds are not fulfilled, but do
not necessarily create value if high levels of distributive levels are achieved. In practice,
however, this provides interesting insights for both the design of reward structures as well
 MD as the size of the prizes in crowdsourcing contests. If the advertised reward is not
55,9 attractive to participants, it is unlikely that they will be motivated to participate at
all (Franke et al., 2013). Conversely, it may also cause negative consequences in case they
still engage. In light of these findings, firms should also be aware of that a winner-takes-all
award structure always produces many losers who might generate significant feelings of
unfairness. Since most participants work hard over several weeks to create what they
1936 deem as appropriate and promising solutions, they may feel frustrated if the award
structure does not acknowledge this effort. A structured allocation of multiple awards
might lead to higher participant investments, since the chances of being rewarded would
be higher. Terwiesch and Xu (2008), for example, propose an optimal reward structure to
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minimize underinvestment by problem-solvers.

In contrast, our study shows that procedural fairness is an excitement factor and leads to
positive consequences when fulfilled, but may not hurt too much if not executed well.
However, a company should take the chance and ensure procedural fairness by, e.g.
guaranteeing an unbiased, transparent, and rule-consistent jury process and by dealing
with the contest community in an honest and truthful manner. By demonstrating the
asymmetric nature of the individual fairness dimensions, we clearly show that
crowdsourcing initiatives are a double-edged sword. From the companys perspective,
this may have severe consequences and they might lose more than they gain with the
generated ideas and designs. Therefore, companies must invest in fair awards and
procedures along with respectful communication and treatment of participants, if they
decide to launch a crowdsourcing contest under their own brand.
Alternatively, as mentioned in the introduction, firms can broadcast their challenges also
via intermediaries who are specialized in launching crowdsourcing competitions for other
companies. Such intermediaries like Atizo, for example, usually have several thousands of
potential problem solvers in their community and dispose of extensive experience in
managing crowdsourcing contests, including how to set the prize structure and how to
design the jury decision process. For companies lacking the experience or the capacities to
manage large-scale crowdsourcing contests it might be advisable to fall back to such
intermediaries and to rely on their professional service. In this case, companies can still
enjoy some of the relationship-building advantages by being visible to the crowd. At the
same time, they can benefit from the safety of a professional contest-managing platform
intermediary and avoid potential PR disasters resulting from fairness violations. Especially
the ongoing interaction with the contest community is a process over several weeks that
need a lot of attention, monitoring, and high responsiveness toward community requests.
During this time procedural fairness perceptions are shaped among participants.
Since procedural fairness in our study emerged as an excitement factor, we see good
relationship-building potential for firms especially in the active community management
during the contest period. Finally, companies must weigh how important the relationship
with end-consumers and crowdsourcing participants is at all, and whether secrecy reasons
might speak against the launch of a crowdsourcing contest under the companys own brand
name. In the case of industrial products positioned very early in the value creation process
of the final product (e.g. chemical compounds) the relationship-building mechanisms of
crowdsourcing competitions may not be relevant at all. For those firms, an anonymized
search via platform intermediaries like InnoCentive might be the better approach to benefit
from the wisdom of crowds.

Limitations and future outlook

Limitations and promising areas for future research warrant discussion in this context.
Our study was limited in that we investigated only one particular design contest,
and therefore our findings may not be generalized to other crowdsourcing competitions.
 The contest attracted more than 900 participants, but our data analysis was based on the Fair play
subset of 121 purified responses from participants who filled out the questionnaire. It is
therefore possible that we did not capture the whole picture, although our sample included
participants who were more engaged compared to the overall contest population and who
therefore are likely to be more sensitive to fairness violations. Furthermore our results are
especially interesting for companies who wish to launch a crowdsourcing contest under the
own brand name. They are however also useful for broadcasting platforms who act as 1937
intermediaries for other firms also those platforms have to care for fairness in order to
maintain a sustainable business model. Future research should also investigate the optimal
award structure that would be perceived as fair, as well as the possible interaction effects
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between various fairness types (as highlighted above). Finally, the jury decision procedures
and the decision process deserve more attention. It has been shown that idea selection by
jury teams (individuals selecting the best idea in the same time and space) does not always
lead to the identification of the best solution (Girotra et al., 2010). It could be helpful to
investigate whether considering the communitys internal votes regarding the selection of
winning ideas improves the perceived procedural fairness level.

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Rita Faullant can be contacted at: rita.faullant@aau.at

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