Reward-based crowdfunding campaigns are commonly offered in one of two models via fundraising goals set by an entrepreneur:"Keep-It-All" (KIA), where the entrepreneur keeps the entire amount raised regardless of achieving the goal, and "All-Or-Nothing" (AON), where the entrepreneur keeps nothing unless the goal is achieved.We hypothesize that AON forces the entrepreneur to bear greater risk and encourages crowdfunders to pledge more capital enabling entrepreneurs to set larger goals. We further hypothesize that AON is a costly signal of commitment for entrepreneurs yielding a separate equilibrium with higher quality and more innovative projects with greater success rates. Empirical tests support both hypotheses.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.