The role of trust management in reward-based crowdfunding

Fundraiser engagement, third-party endorsement and crowdfunding performance: A configurational theory approach

Reward-based crowdfunding is a typical two-sided platform (fundraiser side and backer side) with high information asymmetry. While existing research indicates that signals from fundraisers and backers can impact crowdfunding performance, the interplay among these signals warrants further investigation. Drawing on signaling theory, this study adopts a configurational perspective and utilizes the fsQCA method and linear regression to investigate the combined effects of fundraiser engagement (update and fundraiser comment), third-party endorsement (backer comment and Facebook sharing), and project preparedness (video, image, and description) on crowdfunding performance. Drawing data from the reward-based crowdfunding platform Indiegogo, this research pointed out that these signals cannot generate better crowdfunding performance alone and examined substitution and complementary effects among different signals. Based on the linear regression and fsQCA results, configurations that lead to high crowdfunding performance are identified. We found that project preparedness must work with other signals to produce high crowdfunding performance. Besides, we summarized these configurations into two patterns that may lead to high crowdfunding performance: a fundraiser engagement-driven pattern and a third-party endorsement-driven pattern. This study contributes a configurational perspective and valuable insights into how signals can work together to mitigate information asymmetry in crowdfunding.

Investors' confidence in the crowdlending platform and the impact of Covid-19

Crowdlending platforms have gained importance in recent years due to digitalization. The Covid-19 pandemic has severely impacted the entire economy, including repercussions on digital transactions. Investors considering transactions on these platforms require confidence in both the platform and the project in order to make the right decision. For this reason, this study analyzes the links between the parties involved in the process. A survey was sent to 135 investors on the Colectual platform in January 2022, and the research method adopted is Fuzzy Set Qualitative Comparative Analysis (fsQCA). The study examines the connections between the platform, the investors, and the project developers, to assess the influence exerted by the platform on the confidence of the parties seeking and providing investment. The main result is that Covid-19 has been a key factor in the confidence of investors in the platform, and it has had a significant influence on the investments made.

Crowd Reactions to Entrepreneurial Failure in Rewards-Based Crowdfunding: A Psychological Contract Theory Perspective

Rewards-based crowdfunding (RBC) has recently gained popularity as an alternative means of finance to help entrepreneurs bring novel projects to life. We theorize that crowdfunding backers perceive an implicit psychological contract with campaign creators. When promised rewards fail to materialize post fundraising, backers may perceive entrepreneurs’ failure to deliver rewards as a violation of their psychological contract with him or her. Drawing on psychological contract theory and using Eisenhardt’s comparative case methodology, we generate insights about crowd reactions to creators’ failure to deliver rewards to backers. Our research generates the novel insight that in the event of delivery failure, backers who perceive a transactional psychological contract with creators are more likely to display negative emotional reactions, while backers who perceive a relational psychological contract are more likely to display positive emotional reactions. Furthermore, we identify three progressive stages of backers’ interaction with creators in failed RBC campaigns, ‘committing’, ‘crisis handling’, and ‘coping-up’ and highlight the crowds’ emotional valence associated with each stage. Our analyses of the campaign comments reveal insights of interest to RBC players and hold implications for the future development of crowdfunding.

Networking the commons: creative commons project creators funding patterns in crowdfunding

Purpose

Guided by the collective action theory, signaling theory and social identity approach, this study examines backing behavior by individuals who have created projects under CC licenses. Two motivational mechanisms were examined: (1) identification via common interests in the CC space; (2) resource signaling by other users via their diverse project creation experience, funding or commenting activity.

Design/methodology/approach

Data were collected from Kickstarter.com. Exponential random graph modeling was used to examine how the two reviewed mechanisms influence the tie formation probability between Creative Commons (CC) project creators and other creators. The analysis was conducted on two subnetworks: one with ties between CC creators; and one with ties from CC creators to non-CC creators.

Findings

The study found that CC creators exhibit distinct backing patterns when considering funding other CC creators compared to non-CC users. When considering funding their peer CC creators, CC identity can help them allocate and support perceived in-group members; when considering funding non-CC creators, shared common interests in competitive project categories potentially triggers a competition mindset and makes them hold back when they see potential rivals.

Originality/value

This study makes three contributions. First, it draws from multiple theoretical frameworks to investigate unique motivations when crowdfunders take on dual roles of creators and funders and offered implications on how to manage competition and collaboration simultaneously. Second, with network analysis our study not only identifies multiple motivators at work for collective action, but also demonstrates their differential effects in crowdfunding. Third, the integration of multiple theoretical frameworks allows opportunities for theory building.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/OIR-05-2020-0166.

Fintech Attaining Sustainable Development: An Investor Perspective of Crowdfunding Platforms in a Developing Country

Crowdfunding is a successful disruptive innovation of fintech that substitutes financial intermediaries and contributes toward financial inclusion and sustainable development. The present research aimed at exploring the underlying determinant factors that shape the investors’ intentions to fund in a crowdfunding platform, a phenomenon still under-researched in the developing world. To bridge this void in the literature, we investigated how calculus and relational trust mediate the effects of perceived accreditation, blockchain technology, structural assurance, and third-party seal on the investors’ intention using the SEM technique to analyze the data collected from 110 platform investors in Pakistan. Findings suggest that third-party seal and blockchain technology strongly influence the calculus trust. While the investors’ intention to invest is mediated by calculus trust, the relational trust fails to show any mediation effect, suggesting that investors make investment decisions based on what makes sense to them cognitively instead of affectively. The research was concluded with implications for both theory and practice.

Exploring entrepreneurial characteristics, motivations and behaviours in equity crowdfunding: some evidence from Italy

Purpose

This study explores entrepreneurial decision-making in the equity crowdfunding (ECF) context, and it aims to shed some light on the relationship among three aspects: entrepreneurial characteristics (i.e. entrepreneurial alertness and entrepreneurial self-efficacy), entrepreneurial motivations (i.e. promotion, improvement of networking and acquisition of product and market knowledge) and entrepreneurial behaviours (i.e. campaign characteristics in terms of communication and offerings).

Design/methodology/approach

The hypotheses testing and analysis were conducted using the partial least squares approach to structural equation modelling, and data were collected from the overall population of Italian ECF platforms.

Findings

Our results highlight that entrepreneurial characteristics may be central in ECF because of their significant impact on some motivation entrepreneurs have to adopt ECF, which in turn have an impact on meaningful campaign characteristics that can influence ECF performance.

Originality/value

The current literature is mainly focused on investors' decisions, while a neglected perspective until now has been that of entrepreneurs. This study is among the first to focus on entrepreneurs in the ECF context, and, to the best of our knowledge, it is the first study to investigate the entrepreneurial decision-making process. The added value of this research lies in the analysis of the entrepreneurial aspects underlying entrepreneurial decisions to use ECF.

Influences of Medical Crowdfunding Website Design Features on Trust and Intention to Donate: Controlled Laboratory Experiment

Background

As a type of donation-based crowdfunding, medical crowdfunding has gradually become an important way for patients who have difficulty paying medical bills to seek help from the public. However, many people still have limited confidence in donating money to medical crowdfunding projects.

Objective

Given that the features of a medical crowdfunding website may be important to gain users’ trust, this study draws upon two-factor and trust theories to explore how different design features of medical crowdfunding websites affect potential donors’ cognition-based trust and affect-based trust, and how these types of trust affect the intention to donate.

Methods

A 2 (informativeness: high vs low) × 2 (visual cues: cool color vs warm color) × 2 (social cues: with vs without) between-subject laboratory experiment was performed to validate our research model. A total of 320 undergraduate students recruited from a university in China participated in the controlled laboratory experiment.

Results

Cognition-based trust (β=.528, P<.001) and affect-based trust (β=.344, P<.001) exerted significant effects on the intention to donate of potential donors of medical crowdfunding. Informativeness as a hygiene factor positively influenced potential donors’ cognition-based trust (F_1,311=49.764, P<.001) and affect-based trust (F_1,311=16.093, P<.001), whereas social cues as a motivating factor significantly influenced potential donors’ cognition-based trust (F_1,311=38.160, P<.001) and affect-based trust (F_1,311=23.265, P<.001). However, the color of the webpages affected the two dimensions of trust differently. Specifically, medical crowdfunding webpages with warm colors were more likely to induce affect-based trust than those with cool colors (F_1,311=17.120, P<.001), whereas no significant difference was found between the effects of cool and warm colors on cognition-based trust (F_1,311=1.707, P=.19).

Conclusions

This study deepens our understanding of the relationships among the design features of medical crowdfunding websites, trust, and intention to donate, and provides guidelines for managers of medical crowdfunding platforms to enhance potential donors’ trust-building by improving the website design features.

Investor Intention in Equity Crowdfunding. Does Trust Matter?

Equity crowdfunding (ECF) is becoming a convenient alternative instrument for investing in entrepreneurs’ projects in many countries. The purpose of this study was to investigate the factors that affect the investor’s intentions toward ECF platforms in Saudi Arabia, where they have not been introduced until very recently. This context offers a unique opportunity to test the role of investors’ perceived trust in the context of ECF. The proposed framework builds on two critical layers: (1) trust in the platform (intermediary) and (2) trust in the fundraiser. Structured equation modelling was applied to examine the factors that affect investors’ trust and intentions. The framework was analysed using survey data from 216 users of Manafa, one of the largest ECF platforms in Saudi Arabia. Our findings showed that both fundraiser and platform trust have a significant effect on the investor’s intentions. In particular, trust in the platform substantially impacts the fundraiser’s trust, showing the importance of the fundraiser’s reliance on trusted institutions. On the other hand, to build investors’ trust, fundraisers must deliver high-quality information for their projects.

Guanxi, trust and reward-based crowdfunding success: a Chinese case

Purpose

This paper aims to examine different hypotheses concerning the effects of guanxi on the reward-based crowdfunding project fundraising. Specifically, this study provides new insights into how guanxi and guanxi intensity may affect reward-based crowdfunding success and project performance in the Chinese context.

Design/methodology/approach

The research data including 989 crowdfunding projects were collected from zhongchou.com which is the largest reward-based crowdfunding platform in a one-year period (2014.1-2014.12). The hypotheses are tested by using robust OLS regressions and robust logistic regressions. Robustness check was also conducted to test the validation of the results.

Findings

This paper found that project developers’ guanxi-establishing behavior conducted before launching their own projects such as being fans of other projects and supporting other projects are positively related to project success. In addition, the intensity of guanxi-establishing behavior positively influences project performance in a significant way. Besides, the establishment and maintenance of project developers’ guanxi with funders during the fundraising process are also positively associated with project success and fundraising performance.

Originality/value

Based on the theory of trust, this paper offers an interesting and novel perspective to investigate reward-based crowdfunding success in the Chinese context by taking guanxi and guanxi intensity into consideration.