CROWDSOURCING AS A SOLUTION TO distan search.

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Concepts:
crowdsourcing, distant search, focal agent, crowd, landscape, designating, complexity,
agent, solving, contractor, neighborhood, Nelson, local search, Internet, firm.
noncs:
We argue that under certain circumstances crowdsourcing transforms distant search into
local search, improving the efficiency and effectiveness of problem solving.
Under such circumstances a firm may choose to crowdsource problem solving rather than
solve the problem internally or contract it to a designated supplier.
These circumstances depend on the characteristics of the problem, the knowledge required
for the solution, the crowd, and the solutions to be evaluated.
Crowdsourcing is the act of outsourcing a task to a "crowd," rather than to a designated
"agent" (an organization, informal or formal team, or individual), such as a contractor, in the
form of an open call (Howe, 2006, 2008; Jeppesen & Lakhani, 2010).
In one form of crowdsourcing ("tournament-based crowdsourcing"), each agent from the
crowd self-selects to work on its own solution to the problem, and the best solution is chosen
as the winning solution.
For example, rather than have its own scientists develop an algorithm internally to further
improve its movie recommendation system, or contracting the development with a
designated contractor, Netflix crowdsourced the task by outsourcing it in the form of an open
call to the world.
Anyone who could come up with an algorithm that improved Netflix's existing
recommendation system by at least 10 percent could win $1 million (Villarroel, Taylor, &
Tucci, 2011).
In another form of crowdsourcing ("collaborationbased crowdsourcing"), self-selected
members of the crowd "gang up" (work together) on the problem to solve it, and the result is
the one solution from the crowd.
For example, when Facebook decided to translate its web content from English to different
languages, it turned to the public.
We thank former associate editor Adelaide Wilcox King for her insightful guidance, support,
and encouragement throughout the review process.
We are also grateful for valuable inputs from Anu Wadhwa and the three anonymous
reviewers.
in record time---from English to French in a few days, from English to Spanish in two weeks,
and so on (Facebook, 2009).
Although Howe (2006, 2008) coined the term crowdsourcing with the strong role of the
Internet in mind, the act of outsourcing a task to the public in the form of an open call may

date as far back as 1714, when the British government offered a cash prize---the Longitude
Prize---to anyone who would come up with an elegant way to determine the position of ships
in the sea (The Economist, 2008).
Sheriffs in Wild West movies crowdsourced elements of crime solving whenever they posted
pictures of the "Most Wanted" in public places, with a reward for anyone who would help
bring the suspect to justice.
The use of architecture design contests has led to some of the most notable buildings in the
world, including the Sydney Opera House, the White House, the British Houses of
Parliament, and the Berlin Central Station.
Crowdsourcing may have been around for a long time, but the advent of the Internet and
other communication technologies has opened up many possibilities for the phenomenon to
play out.
For example, faced with the task of identifying people in its collections of old photographs,
the Library of Congress asked members of the photo-sharing site Flickr for help.
Almost instantly, distant relatives and acquaintances were able to identify hundreds of
people in the photographs.
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in the Darfur conflict by marking the sightings on Google Maps (The Economist, 2008).
There are also compelling anecdotal examples of how firms have used crowdsourcing to
perform innovation tasks and/or gain a competitive advantage.
For example, Goldcorp of Canada had difficulties pinpointing the exact location of gold on its
properties and decided to turn to the public (Tapscott & Williams, 2006; Tischler, 2002).
It made its exploration databases available to the public and offered a prize to anyone who
could tell the company where to find gold.
A team from Australia came up with the answer, and Goldcorp struck enough gold to
improve its competitive position from producing 53,000 ounces of gold a year at a cost of
$360 an ounce to producing 504,000 ounces per year at a cost of $59 per ounce.
In their study of InnoCen-tive, a crowdsourcing intermediary, Jeppesen and Lakhani (2010)
found that those problem solvers who were further away from the field from which the
problem came were more likely to solve the problem.
These fascinating examples raise some interesting questions for scholars of management.
For example, when might crowdsourcing be a better mechanism for solving problems than
the alternatives of either solving them internally or designating an exclusive contractor to
solve them?
What type of organization is likely to successfully pursue crowdsourcing?

What types of internal and external environments are conducive to crowdsourcing?

If a firm decides to crowdsource a problem, how should it go about it?
In this article we focus on the first question: When might crowdsourcing be a better
mechanism for solving problems than the alternatives of either solving them internally or
designating an exclusive contractor to solve them?
There is a well-established tradition of exploring such "firm boundary" questions using
transaction cost economics (TCE; e.g., Williamson, 2002).
However, TCE's primary focus is on the characteristics of isolated transactions---some of
which may or may not be relevant to solving a problem (Ghoshal & Moran, 1996).
In addition, in focusing on the attributes of transactions, TCE often neglects firm-specific
factors---such as routines, prior commitments, cognitive frames, knowledge, and absorptive
capacities---that are often critical for solving problems (Ghoshal & Moran, 1996; Leiblein &
Miller, 2003; Nelson, 1991; Nelson & Winter, 1982, 2002).
Consequently, we explore the question by drawing primarily on the behavioral and
evolutionary theories of organizations, especially the search literature (e.g., Cyert & March,
1963; Dosi & Marengo, 2007; March & Simon, 1958; Nelson & Winter, 1982; Simon, 1955).
In particular, we argue that under certain circumstances crowdsourcing transforms distant
search into local search, thereby enabling firms to enjoy the many benefits of distant search
without having to endure many of its costs.
Therefore, crowdsourcing may be a better mechanism than either internal sourcing or
designated contracting for solving problems for which solutions require distant search.
It depends on the type of problem, the difficulties that the focal agent faces in performing
distant search to solve the problem, the type of crowd to which the problem can be
crowdsourced, and the ease with which the final solution can be evaluated.
Specifically, the probability a focal agent (individual, group, or organization) will use
crowdsourcing to solve a problem is high when (1) the problem is easy to delineate and
broadcast to the crowd, (2) the knowledge required to solve the problem falls outside the
focal agent's knowledge neighborhood (requires distant search), (3) the crowd is large, with
some members of the crowd motivated and knowledgeable enough to self-select and solve
the problem, (4) the final solution is easy to evaluate and integrate into the focal agent's
value chain, and (5) information technologies are low cost and pervasive in the environment
that includes the focal agent and the crowd.
Before we explore when crowdsourcing may be better for solving problems for which
solutions require distant search than the alternatives of do-it-yourself or designated
contracting, we briefly present some background information on problem solving and distant
search that will provide insight into the question.
In traditional neoclassical economic models of decision making, (1) decision makers
(agents) are rational, (2) the set of alternatives from which decision makers can choose
(choice set) is known in its entirety ex ante, (3) the consequences involved in choosing each
alternative and the associated risks or degree of certainty are known in their entirety ex ante,
and (4) the agents' utility function is known (March & Simon, 1958) ex ante as well.
Thus, a rational decision maker (agent) is able to arrive at an optimal decision by
maximizing its utility function.

However, in behavioral theories of the firm, decision makers are cognitively limited and have
limited time, limited information, and limited resources; therefore, agents can exercise only
bounded rationality (Cyert & March, 1963; March & Simon, 1958; Nelson & Winter, 1982;
Simon, 1955).
More important, when a decision maker or problem solver conducts a search from its current
position, the consequences of the alternatives that are within the neighborhood of its current
position are relatively easy to predict, since they involve small or no changes from the
current position (Cyert & March, 1963; Winter, Cattani, & Dorsch, 2007).
Thus, when an actor faces a decision, it tends to consider the alternatives that are in the
neighborhood of its existing position---it conducts local searches (Cyert & March, 1963;
Katila, 2002; Katila & Ahuja, 2002; Nelson & Winter, 1982).
When it goes outside that neighborhood, it is conducting "distant search."
For example, when a firm explores alternatives involving a technological trajectory that
currently underpins its competitive advantage, it is conducting local search (Rosenkopf &
Nerkar, 2001; Stuart & Podolny, 1996); however, when it explores alternatives on new and
different technological trajectories or markets, it is conducting distant search (Gruber,
MacMillan, & Thompson, in press).
The rugged landscape metaphor of NK fitness models has been used as a theoretical
device for representing realistic problem-solving complexity with clarity (Levinthal, 1997;
Winter et al., 2007).
We are grateful to Nicolaj Siggelkow for providing us with Mathematica code used to
generate this figure.
A boundedly rational actor is able to conduct only local searches and is therefore able to
identify only negative and positive gradients around its current position; this means that it
can scale its way up the landscape to the nearest peak (Knudsen & Levinthal, 2007;
Levinthal & Warglien, 1999) but will not necessarily find a global maximum.
(Because the agent is boundedly rational and satisfices rather than optimizes, it will be
content with the first peak that it is able to scale, even though there may be higher ones in
the landscape.)
Thus, in the rugged landscape the only chance that the boundedly rational actor will get to
the highest peak is if its current position just happens to be at the foot of or on a slope of the
highest peak (i.e., in the neighborhood of that peak).
If its position is at the foot of or on a slope of any other peak, it will end up climbing that
shorter peak, because it cannot perform distant searches to find out the negative and
positive gradients of distant peaks.
Of course, if the actor were fully rational and could perform distant searches, it would be
able to get to the highest peak of the landscape.
In this article we use the NK fitness landscape model as a metaphor for understanding local
search (exploitation) and distant search (exploration) in the context of problem solving.
With this background information on decision making (problem solving) and with the NK
fitness landscape as a metaphor, we return to the central question of this paper: When might
crowdsourcing be a better mechanism for solving problems than the alternatives of either

solving them internally or designating an exclusive contractor to solve them?

Consider boundedly rational agents (individuals, groups, or organizations) that solve
problems.
Each agent is motivated to solve problems by such needs or desires as money, altruism,
building a reputation, demonstrating its skills, or belonging to some group; the need or
desire need not be solely monetary.
Each of these agents has accumulated, in some area of expertise, some level of knowledge
about the elements that underpin problem solving and the consequences of the different
alternatives.
This area of expertise could be, for example, a region of the world, type of technology, or
functional area within an organization.
Each agent has also developed routines for solving frequently encountered components of
its problems, thereby freeing up cognitive resources for those components requiring more
deliberate examination of alternatives (Nelson & Winter, 1982).
Some of each agent's routines have become repositories of both explicit and tacit
knowledge of alternatives and their consequences (Nelson & Winter, 1982).
Additionally, each agent has developed prob-lem-solving cognitive frames---a set of givens,
beliefs, or assumptions about which alternatives are worth exploring; the consequences of
choosing each alternative; and the expected impact on a potential solution---that act as
lenses through which the agent views problem solving (Dane, 2010; Kaplan & Tripsas, 2008;
Tripsas & Gavetti, 2000; Walsh, 1995).
Now suppose that one of these agents--- call it the focal agent---faces a problem that it
would like to solve in the near future.
The problem could be to optimize a new software algorithm, design a new product, isolate a
chemical compound with specific properties, refine the software test program for a new
product, help monetize a new idea, choose from among many designs, capture a criminal,
cure a disease, and so on.
Performance in solving the problem is measured by the quality of the solution, its cost, the
speed of finding the solution, and/or simply the fact that a solution has been found (Atuahene-Gima, 2003; Sheremata, 2000).
Solving the problem requires N elements (of a decision vector), each of which has to be
chosen from a set.
For example, in Figure 2 N 2, where Variable 1 is the first dimension of choice, Variable 2 is
the second dimension, and Performance (the third dimension, or height of the peaks) is how
well each combination of Variable 1 and Variable 2 solves the problem.
Each point on the surface of the landscape represents an alternate choice that the problem
solver can make.
For example, if the problem were to produce a commercial (advertisement) for a product or
service, using three elements---spectrum of different background scenes, potential
actors/actresses, and storylines--- N would be 3.
The producer of the commercial would have to choose from among many alternatives for

each of the elements.

Each point on the landscape surface would represent a choice of different commercials,
while the height of each peak (in the fourth dimension) on the landscape would represent
the performance of the commercial (e.g., how much people were influenced by the
commercial).
With this background information on the focal agent and the problem that it faces, we return
to the central question of when crowdsourcing is a better mechanism for solving problems
than either internal sourcing or designated contracting.
Internal Sourcing, Designated Supplier, or Crowdsourcing A fully rational agent would have
few difficulties considering the numerous alternatives on the whole landscape and arriving at
the one alternative giving the optimum solution to the problem (taking it to the highest peak).
However, the focal agent, being boundedly rational, is able to make intelligent searches only
in its neighborhood where its routines, cognitive frame, and absorptive capacity can help it in
its assessment of alternatives and their consequences (Cohen & Levinthal, 1990; Cyert &
March, 1963; Nelson & Winter, 1982).
Thus, if the knowledge needed to solve the problem is in the focal agent's neighborhood, the
agent may be able to solve the problem internally.
However, if the knowledge required to solve the problem is outside the focal agent's
neighborhood and it decides to solve the problem by itself, it may have to conduct distant
search to obtain some or all of the knowledge that it needs (Rosenkopf & Nerkar, 2001).
Because of the hurdles associated with distant search, such a do-it-yourself approach may
be problematic.
This is the type of knowledge that the focal agent may have to "learn"---to locate, evaluate,
transfer, and recombine with its existing stocks of knowledge---when it conducts distant
search.
Several hurdles are associated with this distant learning.
First, because the focal agent's expertise, routines, cognitive frame, and absorptive capacity
underpin local rather than global search, it is likely to have difficulties interpreting
alternatives, their consequences, and their possible impact on problem solving when
conducting distant search.
Moreover, learning new routines or building new absorptive capacity can be quite expensive
and/or time consuming (Cohen & Levinthal, 1990; Galunic & Rodan, 1998; Kogut & Zander,
1996; Nelson & Winter, 1982).
Second, compared to local search, distant search is likely to involve consideration of more
alternatives.
Recall that in its knowledge neighborhood the focal agent has routines and a cognitive frame
that reduce the number of alternatives.
Because the agent does not have such routines and frames for conducting distant search, it
has to deal with many more decision elements, together with alternatives and their
consequences.
Effectively, distant search may mean more causal ambiguity because the larger number of

alternatives and their poorly understood consequences make it more difficult to tell which
alternatives result in what level of prob-lem-solving effectiveness (King, 2007; Lippman &
Rumelt, 1982).
Therefore, the fear of failure may discourage some agents from pursuing distant search.
Given these hurdles that are associated with distant search, the focal agent may be better
off either outsourcing the problem to a designated contractor or crowdsourcing it.
Outsourcing a problem to a designated contractor entails evaluating the ability of each
potential contractor to deliver the desired solution and then picking the right one.
But to determine whether potential contractors have the right solution knowledge to solve the
problem, the focal agent must also have the absorptive capacity to evaluate them (Cohen &
Levinthal, 1990), which it might not have because the solution knowledge is not in its local
neighborhood.
Acquiring this absorptive capacity means having to perform distant search.
Thus, locating and evaluating the ability of potential contractors to solve problems may be a
distant search in and of itself as far as the focal agent is concerned.
Furthermore, the focal agent also has to enter an ex ante agreement with the chosen
contractor.
Because the focal agent and potential contractors are boundedly rational, any ex ante
contracts are necessarily incomplete, thereby posing potential contracting hazards that can
be very costly (Williamson, 2002).
In crowdsourcing the focal agent broadcasts the problem to the crowd, just as is often the
case with designated contracting.1 However, the focal agent does not evaluate each
potential candidate to choose a qualified one, as is the case with designated contracting.
The transformation takes the form of formulating the problem and broadcasting it to the
public in such a way that the crowd will see it and will understand it well enough for those
members for whom solving the problem is a local search to self-select and solve it.
For years scholars have drawn a distinction between the tacitness or noncodifiability of
knowledge and its complexity (Kogut & Zander, 1992; Reed & DeFilippi, 1990; Winter, 1987).
For example, because of the nature of several illnesses, many patients cannot articulate
what is wrong with them.
Although it may be possible in some cases to codify tacit knowledge, thereby converting it to
explicit knowledge (Nonaka, 1994), most of it is difficult, if not impossible, to articulate (Kogut
& Zander, 1996; Polanyi, 1967).
In addition, because agents are cognitively limited, it is difficult for the focal agent to
accurately articulate a complex problem (Levinthal & Warglien, 1999), which may cover
several different areas of knowledge and have interdependencies that limit understanding of
cause and effect.
Winter (1987: 172) characterized complexity as requiring a relatively large amount of
information to characterize the knowledge.
number of elements, the degree of interactions among elements, and the consequences of

the different alternatives.

Thus, a focal agent with a tacit or complex problem may not be able to articulate or codify it
for broadcast to potential solvers.
Even if the agent could delineate the knowledge, members of the crowd, being cognitively
limited, might not be able to understand it.
Because interaction between "seeker" (the focal agent) and problem solver is critical in high
tacitness cases (cf. von Hippel, 1994), the cost of interacting with every member of a crowd
that is interested in solving the problem can grow considerably with crowd size (von Hippel,
1994).
With designated contracting only the chosen solver interacts with the focal agent, keeping
the cost lower than that of crowdsourcing.
Complex problems may have to be simplified to make them easier for potential solvers to
understand, but doing so runs the risk of misrepresenting the problem.
This risk is higher when the problem requires a novel solution and the focal agent, in
translating the problem, uses its old routines and cognitive frame (cf. Henderson & Clark,
1990).
Thus, for a focal agent with a tacit and complex problem, it may be less costly to solve the
problem internally, ceteris paribus.
However, if the focal agent does not have the expertise and has to solve the problem using
outsourced solutions, designating a single contractor with the knowledge may be better for
solving the problem than crowdsourcing.
A consequence of tacitness or complexity is that a focal agent's problem may be immobile:
the problem cannot be delineated and transmitted easily over a geographic distance.
If a problem is immobile, all potential crowdsourcees may have to come to the source
instead of having the problem broadcast to them.
Crowdsourcing such a problem would require potential solvers to go to the problem to
understand its intricacies, which could be problematic.
This could be very costly for crowdsourcees, as well as for the focal agent, which would
have to endure many visits to its premises.
Besides, if the focal agent has any intellectual property (IP) that it would like to protect on its
premises in the proximity of the problem, it may not want a crowd to have access to it (cf.
Liebeskind, 1996).
In designated contracting only the contractor comes to the premises, and an ex ante
contract can be structured to give the IP some protection.
Proposition 1a: The easier it is to delineate and transmit a focal agent's problem (because its
tacitness and complexity are low), the higher the probability the agent will crowdsource the
problem.
Modularity also plays an important role in problem solving (Baldwin & Clark, 2006; Ethiraj,
Levinthal, & Roy, 2008; Hoetker, 2006; Pil & Cohen, 2006; Schilling, 2000; Tiwana, 2008).

Modularity is related to (lack of) complexity, but it is not exactly the same thing: some
complex problems are modularizable, whereas others are not.
Most simple problems are modularizable but not all.
Thus, we treat modularizability as a separate factor.
Modularity is much easier when there are no interdependencies between the subtasks---that
is, when the problem is not "systemic" in nature (Chesbrough & Kusunoki, 2001; Pil &
Cohen, 2006; Staudenmayer, Tripsas, & Tucci, 2005).
With a nonmodular system, any member of a crowd that wants to solve the problem
successfully has to have the combined knowledge to solve all the components.
With a modular problem it may be easier for the focal agent to articulate a module (given
that it is simpler) and easier for potential solvers to understand it.
More important, each member of the crowd need only know how to conduct a local search
around its own area to solve a module of the problem.
Different agents with different types and levels of expertise can work on different modules of
the problem and solve them in parallel (Argyres, Bercovitz, & Mayer, 2007; Argyres &
Bigelow, 2010; Schilling, 2000).
Not only is the completion time likely to be shorter but the cost also can be lower and the
quality higher (Ethiraj et al., 2008).
Modular problems are particularly conducive to collaboration-based crowdsourcing.
Concerning interdependencies, solving some problems requires the focal agent and any
potential solver to interact frequently as uncertainty unfolds.
For example, during the development of a product, such as a new airplane, in which the
product and its components keep changing, component makers and product maker must
interact frequently to exchange critical information and resolve questions.
The product developer may be better off developing important components internally instead
of outsourcing them to designated agents (Afuah, 2001).
If the frequency of interactions between the focal agent and potential solution providers is
high, the cost of interaction during crowdsourcing can be exorbitant, because there is
potentially no limit to the number of external agents that can engage in the task and need to
interact with the focal agent.
In addition, because innovation tasks often entail resolving uncertainties through trial, error,
experimentation, and correction, an opportunistic agent may decide to take advantage of
information asymmetries.
In such situations outsourcing to a designated agent may be preferred over crowdsourcing
because the focal agent can use ex ante contracts, even if incomplete ones.
Ex ante contracts with potentially countless potential agents are not usually feasible.
Further, Baldwin and Clark (2006) have shown that problems that are more modular
increase crowd members' incentives to self-select and engage in solving the problems.

In many open source projects, modularity plays a critical role because many solver agents
that work on the projects are volunteers who can offer only a fraction of their time.
Characteristics of Knowledge Required for the Solution Recall that a focal agent can face
many hurdles if it must perform distant search to solve a problem or find the right contractor
to solve it.
These hurdles depend on two factors: (1) the effective distance between the focal agent's
existing knowledge and what it needs to solve the problem (e.g., Hill & Rothaermel, 2003;
Tushman & Anderson, 1986) and (2) the tacitness and complexity of the knowledge it needs
to learn (e.g., von Hippel, 1994).
In contrast with tacitness and complexity as a source of friction in the delineation and
transmission of the problem to the crowd, the focal agent may also be concerned with the
characteristics of the knowledge the solution embodies.
In fact, even when defining a prob-lem---such as the specification of an electric car design--is simple, solving the problem can be complex and require tacit knowledge.
Crowdsourcing may be a preferred mechanism for solving problems for which the solution
rests on tacit knowledge that resides outside the focal agent's knowledge neighborhood
and/or requires distant search to get it transferred, as opposed to internal sourcing or
designated contracting (Figure 4).
Using the performance-solution landscape metaphor of Figure 2, it may be difficult for even
the holder of tacit knowledge to tell where the peaks and valleys in its neighborhood occur
and for which specific alternatives.
For successful crowdsourcing to take place without an ex ante contract, potential solvers
within the crowd need to be motivated enough to self-select to solve the problem, and at
least one potential solver needs to be good enough to solve the problem or one of its
modules.
We explore two of these characteristics (Figure 4): (1) the pervasiveness of problem-solving
know-how in the crowd and (2) the motivation of potential solvers within the crowd to solve
the problem.
Recall that our crowdsourcing propositions so far have been predicated on the fact that the
knowledge needed by the focal agent to solve a problem is not in the agent's local
neighborhood, and the agent must (1) conduct distant search to acquire the knowledge that
it needs to solve the problem, (2) find a designated contractor who can solve the problem, or
(3) pursue crowdsourcing, which holds the possibility of transforming distant into local
search.
How might our propositions have been different had our arguments been rooted primarily in
TCE?
Thus, the focal agent's decision of whether to solve the problem internally or outsource it will
depend primarily on transaction costs and not on problem-solving capabilities.
This contrasts with our approach, in which problem-solving capabilities are not
homogeneously distributed across agents and a focal agent's decision to solve a problem
internally depends very much on agent-specific factors, such as routines, cognitive frame,
absorptive capacity, solution knowledge, and other capabilities.
If we had used TCE in weaving the causal logic for Proposition 2a, we would have arrived at

the conclusion that internal sourcing is a better mechanism (than alternatives) for solving a
problem when the knowledge required to solve it is not from the agent's area of expertise
and the agent does not have the knowledge.
Our predictions were the exact opposite: that crowdsourcing is a better mechanism for
solving such a problem, not internal sourcing, which is in line with empirical research from
Jeppesen and Lakhani (2010).
Effectively, relying on TCE alone may cause us to miss those crowdsourcing boundary
conditions that are rooted in the heterogeneity of problem-solving capabilities.
Several scholars have already pointed to the fact that research on firm boundaries relies too
much on TCE and that not enough attention has been paid to firm-specific factors (Argyres &
Bigelow, 2010; Leiblein & Miller, 2003).
Leiblein, Reuer, and Dalsace have challenged researchers to explore "unobserved
transaction- and firm-level attributes, possibly employing insights from other theoretical
perspectives" (2002: 830) to help us understand outsourcing and its governance.
This article also adds to our understanding of firm boundaries in the face of environmental
changes, such as technological change.
One question that was unexplored at the time was what such "markets" would look like.
That is, how would some of the tasks that were being shifted from internal development to
markets be performed?
This article opens the black box of the market and argues that the market, in the face of the
Internet, consists of crowdsourcing and traditional outsourcing in which tasks are assigned
to a designated contractor.
The Internet facilitates the performance of tasks through crowdsourcing, which involves
more arm's-length transactions than traditional outsourcing to a designated contractor.
However, to keep the article tractable, we assumed that the focal agent has only three
choices: crowdsourcing, internal sourcing, and designated contracting.
In doing so we left out other mechanisms.
A focal agent can also cosolve a problem by working with selected agents.
In new product development, for example, cocreation of products with "crowds" of customers
can be critical for solving some types of problems (Nambisan, 2002; von Hippel, 1994,
2005).
Effectively, an agent may have a continuum of choices rather than discrete choices.
Future research could examine the implications of having such a continuum of choices.
Similarly, the choice of crowdsourcing form may not be limited to tournament-based
crowdsourcing or collabo-ration-based crowdsourcing alone.
An agent that pursues collaboration-based crowdsourcing can also have members of the
crowd compete to offer the best solution for different components of a modular problem,
effectively using both tournament-based crowdsourcing and col-laboration-based
crowdsourcing.

Future research could also look into when and how different combinations of tournamentbased crowdsourcing and collaboration-based crowdsourcing are better solutions to distant
search than each alone.
The potential improvements in problemsolving costs and effectiveness that come from
crowdsourcing could have important ramifications for both existing and emerging
organizational forms.
For example, it has been argued that to meet the changing demands of their dynamic
environments, many organizations often have to perform both explorative and exploitative
activities (March, 1991).
One organizational form that can juggle both the local and distant searches required for
exploitative and explorative activities is the ambidextrous organization (Andriopoulos &
Lewis, 2009; Tushman & O'Reilly, 1996).
Crowdsourcing may be used to more efficiently and effectively perform some explorative
activities, enabling ambidextrous organizations to be more exploitative.
For example, (1) to what extent can crowdsourcing be the answer to core rigidity (LeonardBarton, 1992) or cognitive frame problems (Tripsas & Gavetti, 2000; Walsh, 1995) that some
organizations experience in the face of some technological changes?
If there are changes in organizational forms as a result of increases in crowdsourcing, would
they be largely in industries such as pharmaceuticals, where the value created usually
comes from explorative problem solving and where complementary assets are scarce,
valuable, and difficult to imitate, or from more exploitative industries?
To what extent does crowdsourcing reduce or exacerbate the monitoring problems that,
according to Alchian and Demsetz (1972), are the risons d'tre of using firms to perform
activities rather than using arm's-length market transactions?
These are all interesting questions for future research.
To the extent that established organizations can crowdsource some of their explorative
activities, we can expect some new organizational forms to emerge that perform largely
crowdsourcing activities.
For example, InnoCentive acts as an intermediary by taking problems from seekers and
broadcasting them to problem solvers in such a way that the problem-solving public does
not know the identity of the seekers.
It also ensures the transfer of intellectual property rights from solvers to seekers when that is
important.
In so doing InnoCentive decreases some of the concerns that some seekers may have.
Future research could also explore the roles of intermediaries in influencing the feasibility
and desirability of crowdsourcing.
Our first impression is that factors that favor crowdsourcing in general should also favor
intermediary crowdsourcing, although this topic could be explored further.
To keep our discussion of crowdsourcing tractable, we did not distinguish between tournament-based and collaboration-based crowdsourcing in many of the arguments.

(One exception was our discussion of the impact of the modularizability of a problem on the
probability of crowdsourcing the problem.)
One interesting question is the conditions under which either form of crowdsourcing is more
appropriate than the other.
Clearly, when each component of the expertise needed to solve a problem is uniquely held
by each agent (as in dispersive expertise [Galunic & Rodan, 1998]), and therefore all holders
need to bring their expertise together to solve the problem, collaboration-based
crowdsourcing is more appropriate than tourna-ment-based crowdsourcing, because holders
can "gang up" on the problem and solve it.
Finally, in many anecdotal examples of crowdsourcing, IT plays a crucial role.
However, it is still not very clear what IT's exact role is from a theory point of view.
Exploitationexploration tensions and organizational ambidexterity: Managing paradoxes of
innovation.
Innovation, modularity, and vertical deintegration: Evidence from the early U.S. auto industry.
The effects of centrifugal and centripetal forces on product development speed and quality:
How does problem solving matter?
The architecture of participation: Does code architecture mitigate free riding in the open
source development model?
Bounded rationality and the search for organizational architecture: An evolutionary
perspective on the design of organizations and their evolvability.
Information technology and organizational learning: An investigation of exploration and
exploitation processes.
Uncertain imitability: An analysis of interfirm differences in efficiency under competition.

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