Prediction Markets for Crowdsourcing

Crowdsourcing is an increasingly important phenomenon that is fundamentally changing how companies create and capture value. There are still important questions with respect to how crowdsourcing works and can be applied in practice, especially in business practice. In this chapter, we focus on prediction markets as a mechanism and tool to tap into a crowd in the early stages of an innovation process. The act of opening up to external knowledge sources is also in line with the growing interest in open innovation. One example of a prediction market, a virtual stock market, is applied to open innovation through an online platform. We show that use of mechanisms of internal crowdsourcing with prediction markets can outperform use of external crowds.