The PDMA Handbook of Innovation and New Product Development, 4th Edition

CHAPTER NINETEEN CROWDSOURCING AND CROWDFUNDING:EMERGING APPROACHES FOR NEW PRODUCT CONCEPT GENERATION AND MARKET TESTING

Mohammad Hossein Tajvarpour and Devashish Pujari

19.1 Introduction

Crowdsourcing and crowdfunding have become incredibly popular ways of inbound open innovation that allowed firms to take advantage of external innovation sources (Chesbrough 2003). These two approaches of inbound innovation have gained significant traction in the past decade (Pollok et al. 2019; Zhu et al. 2017). One popular platform alone, has collected more than $6 billion dollars from more than 20 million different individuals to actualize more than 219,000 innovative ideas (Kickstarter 2022).

Both crowdfunding and crowdsourcing are tapping into the wisdom of crowds to generate, test, and refine ideas and new products (Mollick and Nanda 2015). While crowdsourcing collects and refines the ideas from the publics outside the firm, crowdfunding is considered a form of market-testing for the new products and ideas from far and wide. Internet has eased spatial frictions (Agrawal et al., 2015) and made it possible for firms and innovators to collect funds and ideas from very distant individuals. In crowdfunding average distance between supporters and innovators was estimated to be around 2500 km and famous projects such as Oculus Rift, had an average distance of 5000 km from their supporters (Tajvarpour ...