Exploring the dynamic influences and interaction effects of signals on backers’ investment in the crowdfunding market

Song, Yang; Wu, Hong; Ma, Jingdong; Lu, Naiji

doi:10.1108/itp-04-2019-0174

Cited by 23 publications

(25 citation statements)

References 47 publications

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“…Research dedicated to the use of social media before and after a project has reached its funding goal could allow further insights into this dynamic. As already illustrated by Song et al (2020), the strengths of certain signals vary over the funding period, such that studying the dynamic nature of individual signals, such as a dedicated social media strategy, can provide valuable insights into potential determinants of project overfunding.…”

Section: Discussionmentioning

confidence: 99%

The impact of common success factors on overfunding in reward-based crowdfunding: An explorative study and avenues for future research

Pinkow¹

2022

JEMI

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PURPOSE: While there is abundant literature on the key determinants of reward-based crowdfunding success, little research is dedicated to crowdfunding projects that are not only successful but receive significantly more funds than initially targeted through the defined funding goal. This study seeks to shed light on this vastly neglected topic in crowdfunding research. METHODOLOGY: Drawing on a rich dataset of 338 rewardbased crowdfunding projects, this study applied a two-step statistical analysis. First, regression analyses to determine relevant crowdfunding success factors were conducted in order to corroborate extant literature and to highlight that the data properly reflects the already identified key findings on crowdfunding success. In a second step, the very same factors were investigated for the case of overfunded projects, utilizing logistic regression analyses and a Blinder-Oaxaca Decomposition. FINDINGS: Although this study confirmed the findings of previous research considering the factors that increase the success probability of crowdfunding projects, the very same factors turned out to not explain the emergence of project overfunding. For instance, while project founders can provide updates, a higher number of different rewards, or utilize social media pages to increase the likelihood for success, these factors do not contribute to explain the phenomenon of project overfunding. IMPLICATIONS: The results of this study emphasize that in order to understand overfunding of crowdfunding projects, future research must go beyond the basic crowdfunding success factors. Building on the notion of the Two-Factor Theory, the findings suggest that the factors contributing to success can be considered hygiene factors that are required to succeed in the first place. However, these factors do not motivate the crowd to provide further funding to an already successful project. Hence the motivating factors remain yet unobserved in extant literature. In practice, this means that project teams achieving their funding goal cannot rely on the same factors that were helpful to succeed to encourage further funding from the crowd. The differentiation of hygiene and motivating factors for overfunding in reward-based crowdfunding offers rich opportunities for future research. More subjective factors, such as the individual perception of crowd members towards crowdfunding projects, are suggested to play an important role for the occurrence of project overfunding. ORIGINALITY/VALUE: By investigating project overfunding, this study addresses the research gap concerning the factors contributing to the emergence of project overfunding. There is little evidence on the characteristics of overfunded crowdfunding projects, and thus this study provides essential theoretical and empirical groundwork for future research to build upon this study’s results.

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Section: Discussionmentioning

confidence: 99%

The impact of common success factors on overfunding in reward-based crowdfunding: An explorative study and avenues for future research

Pinkow¹

2022

JEMI

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“…Accordingly, existing amounts of funding can signal strong project quality and thereby prompt individuals to contribute to creators and projects that have been successfully invested in by others. In doing so, investors build confidence in creators' ability to execute plans and deliver promised products (Song et al. , 2019).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Chan et al (2020) has also highlighted a similar reason that "illustrate the nonlinear nature of this relationship at the collective level." We propose that the enhancement model will dominate at low levels of prior funding as it represents a valuable quality signal (Song et al, 2019). At high levels, however, we propose the substitution model will dominate because investors will perceive less of an effect in supporting outperformed projects (Kuppuswamy and Bayus, 2017).…”

Section: Introductionmentioning

confidence: 96%

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Rethinking investors' herding behavior under the conditions of reward-based crowdfunding platform

Zhu

Liu

Zhang

2022

IMDS

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PurposeReward-based crowdfunding, an emerging financing channel for SMEs, has attracted significant attention from scholars and practitioners. Scholars have mostly explored investors’ herding behavior in platforms to better understand investors’ decision-making mechanisms and management of funding projects. However, current evidence is inconsistent regarding herding behavior during the funding process. This study proposes prior funding performances have a nonlinear effect on subsequent funding performance and that this nonlinear relationship is conditional on competition intensity and information disclosure.Design/methodology/approachBased on objective data collected from a dominant reward-based crowdfunding platform in China, this study follows a panel ordinary least squares (OLS) model to estimate the effects of prior funding performance on the subsequent funding performance and the moderating role of environmental factors (i.e. competition intensity and information disclosure) in a given platform.FindingsThe results show prior funding performance had an inverted U-shaped effect on subsequent performance; this inverted U-shaped relationship was attenuated when the number of interactive messages was larger and competition was more intense, and it was strengthened when information updates were more frequent.Originality/valueThe effects of prior funding performance on subsequent performance at different stages of the fundraising process and under different platform environments remains unclear. The authors revisit the varying viewpoints in existing research and propose that the enhancement and substitution effects of prior funding performance are dominant at different funding stages. Overall, the results of this study highlight that the crowdfunding platform environment may become a boundary condition for investors' herding behavior.

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“…The notion of the signalling theory established by Spence (1973Spence ( , 2002 finds great acceptance in crowdfunding research (Davies & Giovannetti, 2018;Kunz et al, 2017;Scheaf et al, 2018;Song et al, 2020;Summers et al, 2016). The signalling theory assumes a signalling environment, in which a signaller sends a signal to a receiver, who then interprets the signal and sends feedback to the signaller (Connelly et al, 2011).…”

Section: Application Of Signalling Theory In the Crowdfunding Environmentmentioning

confidence: 99%

Re-Examining Crowdfunding Success: How the Crowdfunding Goal Moderates the Relationship of Success Factors and Crowdfunding Performance

Pinkow¹,

Emmerich²

2021

CEBR

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The factors determining the success of crowdfunding projects is one of the central issues for crowdfunding researchers. Quantitative approaches recognise the number of funds targeted as an important control variable. However, little is known about the impact of the funding goal on other factors that impact crowdfunding success. We hypothesise that the effect of crowdfunding success factors varies contingent on the funding goal level. A dataset of 338 crowdfunding projects from the largest German crowdfunding platform StartNext in the years 2015 to 2016 is analysed by conducting regression analyses controlling for varying funding goal sizes. We use the dependent variables success, the degree of success and the number of project supporters and control whether the effect of independent variables such as comments, updates and social media depend on different funding goals. Our study indicates that the impact of the investigated success factors, in fact, strongly depends on the funding goal levels of crowdfunding projects. By grouping projects into clusters of varying funding goals, we find that the impact of individual success factors changes and that the funding goal plays a moderating role for factors impacting project success. Implications for Central European audience: Many crowdfunding studies focus on the most popular US-based platforms like Kickstarter or Indiegogo. We examined projects on the largest German reward-based crowdfunding platform StartNext. These results help both researchers and future entrepreneurs in Europe to better understand supporter behaviour. We suggest that future entrepreneurs should be aware that factors influencing the success of a crowdfunding project strongly depend on the set funding goal, which should be adequately considered in future crowdfunding research.

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Exploring the dynamic influences and interaction effects of signals on backers’ investment in the crowdfunding market

Cited by 23 publications

References 47 publications

The impact of common success factors on overfunding in reward-based crowdfunding: An explorative study and avenues for future research

The impact of common success factors on overfunding in reward-based crowdfunding: An explorative study and avenues for future research

Rethinking investors' herding behavior under the conditions of reward-based crowdfunding platform

Re-Examining Crowdfunding Success: How the Crowdfunding Goal Moderates the Relationship of Success Factors and Crowdfunding Performance

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