Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response

Abstract

Online crowdfunding has emerged as a powerful tool to raise funds for emergency response. Crowdfunding campaigns can use two transparency tools to attract donors: updates and certification. Updates are additional messages that the organizer issues after launching the campaign and are a form of operational transparency when they communicate the campaign’s work to donors. Alternatively, certification is a form of conventional transparency that ensures the campaign truly benefits a charitable purpose. Using an econometric analysis, we investigate the effects of transparency on donations. We study the direction of causality and mechanisms behind work‐related updates by conducting an experiment. Results from the econometric analysis using over 100,000 campaigns benefiting victims of emergencies reveal that both updates and certification have positive effects on donations. Each additional work‐related word in an update (operational transparency) increases donations on average by $65 per month, while certification (conventional transparency) raises funds on average by $22 per month. Results from the experiment confirm the direction of causality; posting work‐related updates in crowdfunding campaigns increases donations. Two mechanisms explain this effect: donors’ enhanced perceptions of effort and perceptions of trust.

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The role you play, the life you have: Donor retention in online charitable crowdfunding platform

“…With the rapid development of online charitable market, more and more attentions have been paid to the antecedents of successfully funded projects. Some studies within this stream pointed out that the credibility of fundraisers, projects' quality and popularity, fundraising information transparence [ 25 ], donor identity [ 20 ] as well as the social influence form social media platforms [ 2 , 47 ] in online charitable market can significantly affect online donors' contribution intention and projects' fundraising performance. Authority certification from third party also can help fundraisers collect the money they need [ 25 , 31 ].…”

“…Some studies within this stream pointed out that the credibility of fundraisers, projects' quality and popularity, fundraising information transparence [ 25 ], donor identity [ 20 ] as well as the social influence form social media platforms [ 2 , 47 ] in online charitable market can significantly affect online donors' contribution intention and projects' fundraising performance. Authority certification from third party also can help fundraisers collect the money they need [ 25 , 31 ]. With the widely use of many prosocial marketing programs such as “ charitable gift card ” and “ donation matching offer ”, some researches begin to explore their impacts on donors' contribution behavior and projects' fundraising performance.…”

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Can Distributed Ledger Technologies Promote Trust for Charities? A Literature Review

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