Why spend time on a contest v. submitting to a publisher?
You should take advantage of all the benefits a contest can offer your novel manuscript. First contests offer you one guarantee: your manuscript will be read. A publisher can't guarantee that. Granted, most contests only want you to submit a portion of your novel, but know that those pages will be read and considered by an industry professional - either a published author, an editor, an agent, etc.
A second benefit is that if your manuscript wins or places high in a contest, it builds history and a solid reputation. Because contests are judged by people in the industry, agents or editors will take that prize as a reference. "Editor Smith at X-House Publishing said this book was worthy of this prize. Therefore, it must be worthy of my time."
The prizes themselves are a great benefit. Many contests offer publication as their grand prize. See you met your goal after all. Others will help you set meetings with agents or editors to pitch your manuscript. And don't forget the cash. What writer can't use good ol' cash in his pocket?
What do novel contests want in terms of submissions?
There are two types of novel contests. The first and most predominant contest type wants previously unpublished novels. The other type of contest is for books that have been published. Usually those contests seek to honor first books, often from specific demographic groups.
Novel contests vary in terms of genre. There are genre specific contests, but open genre contests are more prevalent. Some go a step further in their openness and accept not only novels, but novellas, book-length short story collections and more.
Where can you find novel contests listings?
As always start with Google and search both "novel contests" and "book contests." Other resources include NewPages.com, Poets & Writers Grants and Awards Database, both of which are searchable by deadline date. FundsforWriters.com offers a contest page available through a link on the home page, and there are two newsletters you can subscribe to that include contests listings. One's free. The other is reasonably priced. Editor Hope Clark lists all kinds of contests, not just book/novel contests. Another resource is the subscription service WritersMarket.com. Again, this website lists all kind of contests but there are menus to help you narrow your research.