Enabled by the Internet, online labor markets have emerged to replace the traditional off-line employment with the online short-term contracts. These Internet-based platforms bring together service providers (or freelancers) and employers from around the world. This dissertation focuses on the impact and mechanism in the online labor markets, and it consists of three essays.

The first essay, “Skill Spanning in Online Labor Market --- A Double-edged Sword?” focuses on the impact of service providers’ skill spanning on employers’ hiring decisions. Service providers in online labor markets often display many skills in their profiles to increase their chances of participating in multiple jobs. However, such behavior may lead their displayed skills to straddle multiple categories, that is, skill spanning. In this paper, we extend the concept of category spanning into online labor markets and empirically examine (a) how service providers’ skill spanning affects employers’ hiring decisions for two different types of jobs (routine and non-routine jobs), respectively; and (b) how service providers’ skill match (to what extent service providers meet employers’ requirements) moderates the effects of skill spanning on employers’ hiring decisions. We find that service providers’ skill spanning has different impacts on employers’ hiring decisions for routine and non-routine jobs. Specially, for non-routine jobs, service providers’ skill spanning reduces his or her likelihood of winning the contract; however, for routine jobs, service providers’ skill spanning and the winning probability demonstrate an inverse U-shaped relationship. Furthermore, service providers’ skill match can moderate the negative effects of skill spanning for non-routine jobs but has no significant moderating effects for routine jobs.

In the second essay, “Contract-based or Contest-based? Examining the Effect of Project Scheme on Service Providers’ Participation in Online Labor Markets” we study the effect of project schemes on service providers’ participation in online labor markets. The projects in online labor markets are either published as a contract-based scheme or a contest-based scheme. In this paper, we empirically (a) compare the contract-based and contest-based projects to identify which scheme is superior in terms of attracting service providers’ participation; and (b) examine how the effect of project value on service providers’ participation differs in these two schemes. We integrate a unique data set from Freelancer.com to conduct the within-site comparison. Our data analyses results show that publishing projects as a contract-based scheme can help employers to attract more service providers and save more money on payment but employers achieve lower satisfaction in this scheme. Furthermore, project value and service providers’ participation are positively related in contest-based projects but they exhibit an inverted U-shape relationship in contract-based projects.

The third essay, “Suffer to Survive? Shedding Lights on Dilemma Faced by Inexperienced Workers in Online Labor Markets” focuses on the survival issue of inexperienced service providers in online labor markets. In online labor markets (OLMs), the way employers evaluate applicants and make employment decisions has dramatically changed. To reduce the information processing cost, the role of the reputation system in influencing employers’ hiring decisions is magnified. That is why workers with less transaction experience suffer severe barriers to enter the market and are hard to win contracts regardless of their true capabilities and working experience. To solve the dilemma faced by inexperienced workers, our research is conceived from a novel perspective to explore what kind of employers and which kind of projects have higher acceptance and possibilities of hiring inexperienced workers. Our findings suggest that 1) Compared with employers from developed countries, employers from developing countries are more willing to consider inexperienced workers; 2) Inexperienced workers are less likely to win contracts when the employer has experience as a worker on the platform; 3) Hourly projects will be more willing to consider inexperienced workers compared with fixed-price projects; 4) The phenomenon that inexperienced workers’ possibility of being selected decreases with employers’ experience is more intense for fixed-price projects.

This dissertation contributes to the literature and practice in several ways. First, the first study introduces the concept of category spanning in product area to the online labor context. Specially, this study identifies the effect of service providers’ skill spanning on employers’ hiring decisions and also the moderating effects of service providers’ skill match for two types of jobs. Second, this study contributes to the research on category spanning by blurring the boundaries of categories and considering the expectation of the audience side. Our findings can provide guidance to service providers on the configuration of their skillset and help platform owners to better design platform-based functions.

Second, previous studies have focused on investigating the factors that influence project performance within one project scheme. To our knowledge, our second study is the first to combine two projects schemes and examine the impacts of project schemes (contract-based versus contest-based) on service providers’ participation. Second, our findings also contribute to social exchange theory by offering a more context-specific understanding of how service providers trade off the benefits and costs when making decisions to participate in online labor markets. Third, our findings provide empirical evidence that project value has different impacts in contract-based and contest-based projects. Our findings have significant implications for employers on how to properly determine their project scheme and project value when they publish projects in online labor markets.

Third, our study is one of the first to focus on the entry barrier issue of inexperienced service providers in online labor markets. Furthermore, this research employed a novel perspective and emphasized the role of project-related and employer-related factors in influencing hiring decisions, while most of the previous studies in the OLMs literature focused on service provider attributes. Our findings can help the healthy and sustainable development of the online labor platforms and provide guidance to inexperienced service providers on their bidding strategies.