Crowdsourcing and stock market

Open innovation changed the traditional innovation concept based on internal processes by leveraging on collaborations among several participants involved in order to tap into crowd wisdom: the participation of large amounts of people makes more likely the collection of “extreme outcomes”, intended as brilliant ideas distinguishable from average suggestions, which are valuable for companies. Thanks to the advancement in information technologies, an approach increasingly used to open up the innovation process and achieve explorative searches is crowdsourcing, aimed to help in the idea generation phase by leveraging the collective intelligence of the crowd. Despite theoretical claims on the benefits of crowdsourcing, and the argued positive effects on the quality of the R&D outcomes, previous research has not yet analyzed the impact of crowdsourcing on the overall firm performance. Following the signaling theory that links firm valuation to firm announced activities, we evaluate the overall effect brought about by crowdsourcing on firm performance by looking at the stock market reaction to the announcements. Through an event study, we demonstrate that crowdsourcing projects announcements trigger positive price shocks, reflecting investors’ positive expectations about companies’ future profits, and we highlight which factors moderate such reaction.