Unpacking the Antecedents of Crowdfunding Campaign’s Success: The Effects of Social Media and Innovation Orientation

We applied a capabilities view as the theoretical underpinning to investigate the integrative role of orientation (IO) and the strategic use of social media (SSM) on a firm’s crowdfunding campaign success (CFS). We suggest that IO promotes a firm’s ability to succeed with crowdfunding campaigns, and that this relationship is mediated by the SSM. To check our contentions, we surveyed professionals from 322 firms that conducted crowdfunding campaigns. For IO and SSM, we used preexisting scales, while for CFS we created and validated our own seven‐item scale. We found that IO alone does not fully account for CFS, but rather its effect is based on a firm’s ability to SSM. Our findings contribute to the literature on strategic entrepreneurship, media strategy, and public policy.     

Red flags and rave reviews: Explaining too-good-to-be-true crowdfunding campaigns

Crowdfunding platforms enable entrepreneurs to bring to life ideas that may otherwise have remained unrealized. When crowdfunding campaigns go well, campaigners are able to fulfill their vision, funders’ engagement is rewarded, and society gains access to a range of new offerings. But some recent high-profile medical-technology campaigns have failed to deliver their promised rewards despite reaching and at times far exceeding their funding goals. The objectives of this article are to shed light on why donors fund campaigns that turn out to be too good to be true and to examine how this engagement reduces trust in crowdfunding. To this end, I explore the role of product creativity as a dual mechanism for both funding success and postfunding delivery failure. Product creativity is typically associated with positive crowdfunding outcomes. But in the context of medical-technology campaigns, product creativity may make community members more attracted to campaigns that are less likely to deliver on their campaign promises. This phenomenon then increases the likelihood that the campaign will reduce trust in crowdfunding, hurting donors, the focal venture, and future campaigners. I offer practical implications for crowdfunding platforms, campaigners, and supporters interested in learning more about the pitfalls associated with initially successful crowdfunding campaigns.     

Human capital signals and entrepreneurs’ success in equity crowdfunding

Grounding on research about the role of signals in the attraction of equity finance, this paper studies the effects of diverse human capital signals on entrepreneurs’ success in equity crowdfunding. We argue that the human capital of an entrepreneur, who launches (alone or with other teammates) an equity crowdfunding campaign to finance her start-up, constitutes a set of signals of the start-up quality. The impact of each human capital signal on entrepreneur’s success in equity crowdfunding depends on both signal fit with start-up quality and signal ambiguity. Empirical estimates on 284 entrepreneurs who launched equity crowdfunding campaigns indicate that only entrepreneurs’ business education and entrepreneurial experience, two human capital signals that have both a good fit with start-up quality and a low degree of ambiguity, significantly contribute to entrepreneurs’ success in equity crowdfunding.     

Following the Crowd—Does Crowdfunding Affect Venture Capitalists’ Selection of Entrepreneurial Ventures?

Given the increasing popularity of crowdfunding as a new means to finance entrepreneurial ventures, we assess whether and how crowdfunding campaign‐specific signals that affect campaign success influence venture capitalists’ selection decisions in ventures’ follow‐up funding process. Our study relies on cross‐referencing a proprietary data set of 56,000 crowdfunding campaigns that ran on Kickstarter between 2009 and 2016 with 100,000 investments in the same period from the Crunchbase data set. Drawing on signaling theory and the microfinance literature, our empirical findings reveal that a successful crowdfunding campaign leads to a higher likelihood to receive follow‐up venture capital (VC) financing, and that there exists an inverted U‐shaped relationship between the funding‐ratio and the probability to receive VC funding. Further, we find statistical evidence that an endorsement by the platform provider has a likewise positive impact on the receipt of VC. Contrary to our expectations, word‐of‐mouth volume seems to be a negligible factor when it comes to follow‐up VC financing. Our results support the view that crowdfunding signals are factored into the VC’s funding decision in order to evaluate the potential of entrepreneurial ventures.     

Working the crowd: Leveraging podcasts to enhance crowdfunding success

Crowdfunding has become an increasingly popular tool for entrepreneurs to solicit public funding from individuals. As its popularity grows, entrepreneurs are seeking to learn more about crowdfunding to improve their chances of success. In this article, we explore how podcasts can offer fresh insights to crowdfunding and serve as an effective tool for entrepreneurs to improve their knowledge and the likelihood that their campaigns are funded. We discuss key insights for entrepreneurs offered by ten popular podcast episodes on crowdfunding. Each episode offers enduring lessons for entrepreneurs interested in launching a campaign and also exemplifies the value that podcasts can potentially offer entrepreneurs.     

Narcissistic rhetoric and crowdfunding performance: A social role theory perspective

Drawing from clinical and organizational narcissism research, we develop a novel measure of narcissistic rhetoric, investigating its prevalence in a sample of 1863 crowdfunding campaigns. An experiment using 1800 observations further validates our measure and confirms our hypothesized inverted-U relationship between narcissistic rhetoric and crowdfunding performance. Leveraging social role theory, we explore sex, sexual orientation, and race as potential moderators of this relationship. Moderation tests reveal LGBTQ entrepreneurs generally yield greater performance when using narcissistic rhetoric than heterosexuals while racial minorities underperform Caucasians using narcissistic rhetoric. Our findings suggest successful crowdfunding campaigns must balance narcissistic rhetoric with entrepreneurs' perceived social roles.     

Entrepreneurial risk-taking in crowdfunding campaigns

This paper examines how different sources of risk in reward-based crowdfunding campaigns influence the entrepreneur’s choice of targeted crowdfunding goal. This form of crowdfunding helps entrepreneurs to obtain feedback on market demand (next to raising money), since the pre-purchase decision of the crowd generates useful public information about product demand. However, it may also lead to project discontinuation if not enough money is raised during the campaign. We therefore derive conditions under which the entrepreneur sets a higher target. At other times, this leads entrepreneurs to raise sometimes even more money than necessary when there is a risk that the idea is quickly replicated by others, leading to even larger campaigns but also to fewer projects offered on platforms. Conversely, the increased presence of professional investors (business angels, venture capitalists) on platforms reduces the entrepreneurs’ incentives in their crowdfunding campaign, which leads to more but on average smaller crowdfunding campaigns.     

Launching for success: The effects of psychological distance and mental simulation on funding decisions and crowdfunding performance

This research examines how potential backers form mental representations of products in reward-based crowdfunding campaigns, and how these representations affect funding decisions and campaign performance. To test our framework, we conducted four experiments and also drew on a sample of 961 Kickstarter campaigns. Our results show that two campaign characteristics – the product's development stage and the indicated time to product delivery – determine the psychological distance that supporters experience in response to a campaign, and that psychological distance, in turn, inhibits individual campaign contributions and cumulative campaign success. Furthermore, we find that encouraging supporters to imagine the benefits of product usage is an effective means to increase support for campaigns that elicit high psychological distance.     

Bellwether and the herd? Unpacking the u-shaped relationship between prior funding and subsequent contributions in reward-based crowdfunding

Building on the insights from observational learning and other social influence research, this study challenges the existing literature that proposes a linear relationship between prior funding and subsequent contributions in the crowdfunding setting. Instead, we propose a U-shaped relationship, illustrating a negative relationship between prior funding and subsequent contributions when funding amounts are small and this relationship becomes positive when prior funding amounts are large. Consistent with the rational herding perspective, we assume that individuals do not mindlessly mimic one others' behaviors, but incorporate quality signals into their decision-making. Signals indicating a high quality project such as video quality, as well as the preparedness and passion of the entrepreneur enhance this U-shaped relationship whereas indicators of situational urgency weaken this relationship. Based on a sample of 11,019 daily observations of 333 Kickstarter projects, we find general support for our hypotheses. Our post hoc experiment further supports the mechanisms underlying the U-shaped relationship. This paper extends our understanding of the relationship between past actions and subsequent behavior, and contributes to the literatures of observational learning, crowdfunding, and visual information.Executive summaryWe challenge the extant literature that has proposed, but inconsistently documented, a positive effect of prior funding on subsequent crowdfunding contributions. We argue that such inconsistency is due to the lack of integration of insights from other social influence research, such as observational learning, threshold models, and bystander effects. This research has been limited when postulating that crowdfunding backers simply imitate others' actions in order to mitigate uncertainty producing a linear effect, yet such an effect depends on the intensity of others' actions and may be curvilinear. This research overlooks the fact that backers do not merely passively imitate others' behaviors, but incorporate quality signals sent by entrepreneurs to make such decisions. Thus, it is important to account for potential moderators that may influence the complex relationship between prior funding and subsequent contributions.Based on observational learning research and related models, accrued prior funding may be perceived differently by potential backers: individuals may view accrued funding as a sign of a decreased funding need on the part of a campaign's creators, because others are already backing the campaign or, alternatively, they may see it as a cue of high product quality. These conflicting effects may lead to a U-shaped relationship between prior funding and subsequent contributions at a collective level. At low funding levels, prior funding may be negatively associated with subsequent contributions because such levels indicate there is already support, but that the campaign may not be of high quality. At medium levels, prior funding may have no effect on contributions, aside from halfhearted interest of other backers. At high levels, prior funding may be positively related to subsequent contributions as this sends a robust cue of project quality and convinces prospective donors to contribute. Further, we derive a U-shaped relationship which may be moderated by visual media-based quality signals and situational urgency.To test these hypotheses, we conducted two studies. One was a field study of 333 Kickstarter projects, with 11,019 daily observations of crowdfunding activities from mid-February 2013 through mid-April 2013. We used the Kicktraq website to track Kickstarter projects and recruited 390 participants via Amazon Mechanical Turk (MTurk) to evaluate the video pitches on Kickstarter. Our results suggest a negative relationship between prior funding and subsequent contributions when funding amounts are small. This relationship becomes positive when prior funding amounts are large. Thus, we find a U-shaped relationship between prior funding and subsequent contributions, with an inflection point when prior funding amounts reach between 72% and 80% of the funding goal. This is strengthened in the presence of visual media-based quality signals, such as video quality, as well as the preparedness and passion of the entrepreneur. However, indicators of situational urgency may weaken this U-shaped relationship.We followed up with a post hoc experiment to document the two mechanisms by which prior funding influence subsequent contributions. We found that increases in the prior funding amount increased perceived product quality but decreased perceived urgency. These perceptions were found to jointly influence participants' proposed pledged amounts, supporting an explanation of a complex relationship between prior funding and subsequent contributions.This study is among the first to offer a more complete picture of the relationship between past actions and subsequent behavior under market and institutional constraints (i.e., when market actors observe the censored behaviors of other actors on crowdfunding platforms) and contributes to the literatures of observational learning, crowdfunding, and visual information.     

The right touch of pitch assertiveness: Examining entrepreneurs' gender and project category fit in crowdfunding

Scholars have devoted significant attention to the role of entrepreneurs' communication, and gender in crowdfunding. Yet, how female and male entrepreneurs can effectively configure their assertive communication style and the role gender norms within project categories play in shaping crowdfunders' evaluations of entrepreneurs' communication style remains unanswered. To address this, we conduct an exploratory qualitative comparative case analysis (QCA) of 1600 entrepreneurs who pitched their ventures on Kickstarter. From prior research, we identified four distinct kinds of assertive language (certain, power, social, tentative) and explore how female and male entrepreneurs' configurations of assertive language relate to crowdfunding success and failure in male-dominated and female-dominated contexts. We found six pitch assertiveness themes, two associated with success, two associated with failure, and two where success versus failure depends on nuanced considerations of the entrepreneur's gender and the gendering of the context. Our study extends our understanding of communication and gender in crowdfunding.     

What's in a logo? The impact of complex visual cues in equity crowdfunding

Visual cues are pervasive on crowdfunding platforms. However, whether and how low validity visual cues can impact the behavior of backers remains largely unknown. In this article, we propose a disfluency-based heuristic framework for understanding the influence of low validity visual cues on equity crowdfunding platforms. Drawing on processing fluency theory and visual heuristics, we propose that backers often automatically process visual cues, and that the subjective experience of ease/difficulty with which backers perceptually process low validity visual cues serves as a heuristic and informs their perceptions of early-stage entrepreneurial ventures. We test our propositions focusing on logos (low validity visual cues that are particularly salient and ubiquitous on equity crowdfunding platforms) and logo complexity (a fundamental characteristic of logo design and established antecedent of processing disfluency). We contend that logo complexity can be interpreted by backers as a signal of venture innovativeness because more (vs. less) complex logos are more difficult to process, and thus, feel less familiar and more unique, original, and novel to backers. Since backers often value innovativeness, we further contend that logo complexity can positively impact backers' funding decisions. We find support for our framework and propositions using a multimethod approach comprising three studies: one survey, one field study, and one experiment. Theoretical contributions and managerial implications are also discussed.     

Regional social capital and moral hazard in crowdfunding

We contribute to institutional and social capital theory by developing a theoretical framework that suggests that informal and formal institutions are important in mitigating moral hazard in reward-based crowdfunding. We analyze a large sample of Kickstarter campaigns to test these predictions. We find a strong positive relationship between entrepreneurs' home-county social capital and their crowdfunding performance. A rule change that strengthens entrepreneurs' obligation to provide backers with the promised rewards is associated with a reduction in the effect of social capital, suggesting that formal institutions can substitute for informal ones and provides causal evidence of the effect of social capital.     

Why pass on viral messages? Because they connect emotionally

In this article, we identify that successful viral marketing campaigns trigger an emotional response in recipients. Working under this premise, we examine the effects of viral messages containing the six primary emotions (surprise, joy, sadness, anger, fear, and disgust) on recipients' emotional responses to viral marketing campaigns and subsequent forwarding behavior. According to our findings, in order to be effective, viral messages need to contain the element of surprise. By itself, however, surprise is not enough to guarantee message success; therefore, it must be combined with other emotions. The effectiveness of the viral message is also moderated by gender, with disgust-based and fear-based campaigns being more likely to be forwarded by male recipients than female recipients. To ensure forwarding behavior, the message must capture the imagination of the recipient, as well as be clearly targeted. Moreover, achieving fit between a campaign and the featured emotions is important, as this ensures an increased chance of forwarding. In addition to relaying these and other findings, we share and discuss the managerial implications of using different emotions in viral marketing campaigns. Finally, culture is recognized as an influencer.     

The power of positivity? The influence of positive psychological capital language on crowdfunding performance

We extend the entrepreneurship literature to include positive psychological capital — an individual or organization's level of psychological resources consisting of hope, optimism, resilience, and confidence — as a salient signal in crowdfunding. We draw from the costless signaling literature to argue that positive psychological capital language usage enhances crowdfunding performance. We examine 1726 crowdfunding campaigns from Kickstarter, finding that entrepreneurs conveying positive psychological capital experience superior fundraising performance. Human capital moderates this relationship while social capital does not, suggesting that costly signals may, at times, enhance the influence of costless signals. Post hoc analyses suggest findings generalize across crowdfunding types, but not to IPOs.     

Administration of crowdfunding at Australian universities

Crowdfunding offers a new funding model for research activities at universities. It combines fundraising with public engagement and an entrepreneurial spirit. While universities might be expected to show enthusiasm for the possibilities of crowdfunding, support has not been widespread in Australia. Only a small number of Australian universities have provided active support for crowdfunding of research activities. Interviews with academics and administrators from two Australian universities with a history of providing strong support for research crowdfunding show that clear vision and firm leadership are required to overcome organizational inertia. Universities need to provide space for academics and administrators to innovate, try new approaches, and even fail as they learn whether crowdfunding works for them. Peer support and organized training can help academics as they seek to build an audience via social media engagement. Universities can also provide analysis of campaign progress and, in some cases, funding to support campaigns. The article concludes with best-practice advice for universities that wish to encourage research crowdfunding supported by a framework that describes a continuum of support, ranging from an outright ban to benign neglect to strong support for this new activity.     

The role of economic and normative signals in international prosocial crowdfunding: An illustration using market orientation and psychological capital

Entrepreneurs in emerging nations are increasingly seeking microloans on international crowdfunding platforms composed of prosocial lenders primarily seeking non-monetary returns. Drawing on signaling theory, we posit that economic signals (as illustrated by market orientation) and normative signals (as illustrated by psychological capital) embedded within borrower narratives will influence funding time. A Computer-Assisted-Text-Analysis (CATA) of 130,964 profiles across 49 countries suggests that borrower cues of customer orientation, competitor orientation, long-term focus, profitability focus, confidence, and optimism are positively associated funding time, while cues of coordination, hope, and resilience are negatively associated with funding time. Prosocial lenders seem less inclined to lend to borrowers that exhibit a desire for economic success or normative expectations for positive outcomes in the future, while they seem to lend more rapidly to those exhibiting current hardship or a concern for people. A discussion of these findings and their implications for poverty alleviation concludes the study.     

Reactance:

Frequently, public sector marketers seek to persuade individuals to engage or not engage in certain forms of behavior. However, research examining reactance suggests that certain choice-restricting messages that are conveyed in public sector promotional campaigns may actually result in promoting more of an undesired behavior or less of a desired behavior. Thus, an understanding of factors associated with reactance arousal may be critical to the overall success of promotional efforts undertaken by public sector marketers. In this paper, these factors are reviewed, and implications of reactance theory for designing promotional campaigns of non-profit and public sector organizations are discussed.