Innovation and learning performance implications of free revealing and knowledge brokering in competing communities: insights from the Netflix Prize challenge

Firms increasingly use open competitions to extend their innovation process and access new diverse knowledge. The Netflix Prize case we study in this paper is a multi-stage repeat-submission open competition involving the creation of new knowledge from across knowledge domains, a process which benefits from knowledge sharing across competing communities. The extant literature says little about the effects of different types and levels of knowledge sharing behavior on the learning and innovation outcomes of such a competitive system, or what the performance boundaries may be for the system as a result of such differences. Our research explores those boundaries unveiling important tradeoffs involving free revealing behavior-defined as voluntarily giving away codified knowledge and making it into a 'public good'aEuro"and knowledge brokering behavior-defined as using knowledge from one domain to innovate in another-on the learning performance of competing communities. The results, analyzing the system-level average and volatility of learning outcomes, lead to three conclusions: (i) greater knowledge sharing, as portrayed by greater free revealing and knowledge brokering, helps achieve better average learning for the system as a whole, however, (ii) achieving the best overall outcome possible from the system actually requires controlling the amount of knowledge brokering activity in the system. The results further suggest that (iii) it should not be possible to simultaneously achieve both the best overall outcome from the system and the best average learning for the system. The tradeoffs that ensue from these findings have important implications for innovation policy and management. This research contributes to practice by showing how it is possible to achieve different learning performance outcomes by managing the types and levels of knowledge sharing in open competitive systems.