The Impact of Blockbusters in Crowdfunding (original) (raw)
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Winner Takes All? The 'Blockbuster Effect' in Crowdfunding Platforms
SSRN Electronic Journal, 2015
Crowdfunding has gained momentum in recent years. Even though an increasing amount of research has been devoted to the economic value of crowdfunding marketplaces, the interactions and effects among crowdfunding projects have yet to be fully studied. The current study strives to bridge this gap by examining the impacts of "blockbuster projects"-i.e., overwhelmingly successful projects-on the crowdfunding platform. Hypotheses are formulated based on the theory of network effects. Our preliminary results suggest the blockbuster projects exhibit positive spill-over effects within project category but cannibalization effects across categories. We also find evidence of lasting positive/negative network externality within/across category/categories. Further analysis suggests that fresh backers who are attracted to the platform by the blockbuster projects tend to be more engaged and more active. Our research aims to extend the emergent crowdfunding literature by examining network externalities among projects. We also provide practical implications for project creators and platform administrators.
Winner Takes All? The Blockbuster Effect on Crowdfunding Platforms
Information Systems Research
Blockbuster projects on crowdfunding platforms are those that have achieved outstanding and exceptional performance. Regarding the impact of blockbuster projects on crowdfunding platforms, there are two plausible yet opposing predictions: they may exhibit both a negative effect by monopolizing backer attention and resources and a positive effect by increasing the activeness of backer side. This tension could be further complicated, considering that blockbusters are inherently heterogeneous. Drawing on the cross-side network effects literature and integrating insights from the unique features of crowdfunding, we develop a theoretical framework highlighting the multidimensional view of blockbuster effects: blockbuster projects have an overall positive effect on the performance of concurrent projects (overall effect), and such positive effect is stronger for related blockbusters (local effect) and blockbusters emerging before the focal project (temporal effect). With data from a leadin...
Community Impact on Crowdfunding Performance
SSRN Electronic Journal, 2000
Many digital platforms, regardless of their business domain, follow the common practice of incorporating social and community features in order to increase their user engagement and expand their online community. Although this practice is advocated by the literature and clearly makes sense, its implications are not well understood. In this research, we aimed to close this literature gap, providing a theoretical framework and empirical evidence regarding the impact of the online community on platform performance. As a testbed, we studied crowdfunding platforms, that is, designated websites aimed at enabling entrepreneurs to raise money over the Internet. We used comprehensive data collected from Kickstarter, the largest crowdfunding platform established to date. We theorized that online platforms, such as Kickstarter, consist not of a single community but rather a hierarchy of multiple, partially competing communities. These communities vary considerably with respect to the interests of their members, their platform participation patterns, and their impact on platform performance. Our suggested framework incorporates the notion of fluidity of online communities; that is, online users and digital communities evolve and change over time. As the interests of the online user change, so does the membership of her immediate community. The proposed framework allows us to identify such community changes and, consequently, to better identify pivotal members of online communities and predict their lifetime value as potential backers. Empirically, we validated our theory by studying the participation patterns of over 6.3 million Kickstarter users, who have supported more than 150 thousand crowdfunding campaigns over more than 5 years. We demonstrated the growth of the different community types and estimated their different impacts on crowdfunding performance over time. Interestingly, we found that some communities, despite high participation rates, had negative impacts on crowdfunding campaign success. We discuss managerial and practical implications of our theory and findings.
The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders
Small Business Economics, 2017
Crowdfunding has enabled large crowds to fund innovative projects. This type of funding might tap into the wisdom of crowds who were previously disconnected from the funding process. We distinguish between in-crowd and out-crowd funders (with and without ties to project creators) in order to test for heteroge-neity in their information use. Based on the analysis of a large-scale survey amongst project funders, this paper shows that in-crowd investors rely more on information about the project creator than out-crowd investors. Out-crowd investors do not seem to attach more importance to information about the project itself than in-crowd investors, except in the case of donation-based crowdfunding. For financial return crowdfunding, financial information becomes less important once a strong relationship with the project creator is established. Our study allows project creators to target information to specific audiences based on their relationship strength across different types of crowdfunding projects.
M@n@gement
This research study combines the theoretical teachings of revealed preferences, signal theory and weak tie theory to better understand the dynamics at work at the beginning of a campaign and to explain its success. By identifying the revealed preferences of early backers through their common past contributions, we characterize as strong or weak the nature of the complex preference ties between them. We build networks of the contributions made by the individuals identified as early backers to 9,425 campaigns run on the Ulule platform between July 2010 and September 2014. The results of this study underline the importance of the presence of strong preference ties between early backers and other platform users for the success of campaigns. They also corroborate the theory of the strength of weak ties. Later in the campaign, the intervention of backers with less specific preferences, in the position of intermediaries, positively influences the future outcome by accelerating the fundrais...
The wisdom of the crowd in funding: : Information heterogeneity and social networks of crowdfunder
RePEc: Research Papers in Economics, 2016
Crowdfunding has enabled large crowds to fund innovative projects. This type of funding might tap into the wisdom of crowds who were previously disconnected from the funding process. We distinguish between in-crowd and out-crowd funders (with and without ties to project creators) in order to test for heterogeneity in their information use. Based on the analysis of a large-scale survey amongst project funders, this paper shows that in-crowd investors rely more on information about the project creator than out-crowd investors. Outcrowd investors do not seem to attach more importance to information about the project itself than in-crowd investors, except in the case of donation-based crowdfunding. For financial return crowdfunding, financial information becomes less important once a strong relationship with the project creator is established. Our study allows project creators to target information to specific audiences based on their relationship strength across different types of crowdfunding projects.
The Dynamics of Crowdfunding: An Exploratory Study
Journal of Business Venturing, 2013
Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries. Drawing on a dataset of over 48,500 projects with combined funding over $237 M, this paper offers a description of the underlying dynamics of success and failure among crowdfunded ventures. It suggests that personal networks and underlying project quality are associated with the success of crowdfunding efforts, and that geography is related to both the type of projects proposed and successful fundraising. Finally, I find that the vast majority of founders seem to fulfill their obligations to funders, but that over 75% deliver products later than expected, with the degree of delay predicted by the level and amount of funding a project receives. These results offer insight into the emerging phenomenon of crowdfunding, and also shed light more generally on the ways that the actions of founders may affect their ability to receive entrepreneurial financing.
European Journal of Innovation Management
PurposeCrowdfunding (CF) is a digital-financial innovation that, bypassing credit crisis, bank system rigidities and constraints of the capital market, is allowing new ventures and established companies to get the needed funds to support innovations. After one decade of research, mainly focused on relations between variables and outcomes of the CF campaign, the literature shows methodological lacks about the study of its overall behavior. These reflect into a weak theoretical understanding and inconsistent managerial guidance, leading to a 27% success ratio of campaigns. To bridge this gap, this paper embraces a “complex system” perspective of the CF campaign, able to explore the system's behavior of a campaign over time, in light of its causal loop structure.Design/methodology/approachBy adopting and following the document model building (DMB) methodology, a set of 26 variables and mutual causal relations modeled the system “Crowdfunding campaign” and a data set based on them a...
Find the perfect match: the interplay among Facebook, YouTube and LinkedIn on crowdfunding success
International Journal of Entrepreneurship and Small Business, 2018
Since crowdfunding emerged as a new funding channel for entrepreneurial projects, researchers focused on investigating factors that actually lead to crowdfunding campaign's success. Such tools for promotion of a campaign are, for example, social media. Like crowdfunding platforms they are also Web 2.0 applications, which changed our cultural norms and business praxes by creating the world where country borders became invisible and communication immediate. But how does the activity on social media affect the crowdfunder's decision to pledge money for someone's entrepreneurial endeavours? In this study, we take a look at the influence of electronic word of mouth (eWoM) via Facebook and YouTube, as well as the impact of social capital on the business oriented service LinkedIn, on the success of a crowdfunding campaign. We examine the interplay between these different platforms and propose social media strategies for entrepreneurs, which may increase their chances for being funded.