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. In line with the growing interest in open innovation, we also investigate the difference between using internal or external sources in the context of prediction markets. We apply one example of a prediction market, a virtual stock market, to open innovation through an online platform, and show that using mechanisms of internal crowdsourcing with prediction markets can outperform the use of external crowds under certain conditions.