When Small Predicts Large: The Effect of Early Contribution Amount on Subsequent Contributions to a Crowdfunding Project
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AbstractEntrepreneurs are increasingly relying on internet crowdfunding—the use of online platforms to raise money from a large number of people—as a means of financing their ventures. This research explores the proposition that, at the early stages of a crowdfunding campaign, the amount of money contributed by a majority of the funders can have a counterintuitive influence on follow-up contributions and on the campaign’s likelihood of fundraising success. Findings from an analysis of real-world large-scale crowdfunding data along with online social network data, and four experimentsstudies show that potential funders are more (vs. less) likely to contribute to a newly launched project when early contributions consist mainly of relatively small (vs. large) amounts. We further show that these resultsthis “Small Predicts Large” effect are is driven by “relationship inferences”: when consumers see large contributions made in the early stage of a crowdfunding campaign, they infer that those large contributions are likely to be from entrepreneur’s friends or family members of the entrepreneur. This relationship inference is further shown to Inference of a close social relationship between the entrepreneur and early funders is found to negatively affect consumers’ willingness to contribute. However, if a crowdfunding campaign provides more diagnostic information about the projects, these inferences and their effects attenuate.
Acceptance Date01/01/2018
All Author(s) ListTingting Fan, Leilei Gao, Yael Steinhart
Name of ConferenceCUHK Business School Inter-department Seminar
Start Date of Conference26/01/2018
End Date of Conference26/01/2018
Place of ConferenceHong Kong
Country/Region of ConferenceHong Kong
LanguagesEnglish-United States

Last updated on 2018-29-10 at 10:41