A Longitudinal Examination of the Roles of Project Designs and Social Engagement in a Dynamic Crowdfunding Process

Crowdfunding represents a novel and effective approach to connecting small ventures with huge group of individual funders using an internet-based open call platform (Mollick 2013). It has fundamentally transformed fundraising for entrepreneurs by allowing them harness the power of the crowd in collective evaluation, selection, social, and financial support. Crowdfunding sites have successfully funded more than one million individual projects globally and raised US$2.7 billion in 2012, a number that is expected to double in 2013 (Massolution 2013). Recognizing its significant contribution to economic growth and society, the US government recently legalized crowdfunding to pave the way for its further development. We can foresee that regions such as China and Hong Kong, which possess exciting opportunities to mobilize huge talent pool and innovations resources, will be promising crowd-markets for the further growth and development of crowdfunding.Research with respect to crowdfunding remains in the nascent stage and is composed primarily of descriptive case studies and working papers. Two emerging streams of study offer valuable insight to crowdsourcing. The first stream adopts economic theories (e.g., price discrimination and pre-ordering) to compare the effectiveness of crowdfunding with traditional alternatives (Bellefamme et al. 2012). The second stream uses theories related to social psychology (e.g., diffusion of responsibility effects) and public goods (e.g., substitution effects) to explain how motivations and contributions patterns of funders affect crowdfunding outcomes (Burtch, Ghose, and Wattal 2013; Kuppuswamy and Bayus 2013).However, the majority of existing studies focus on individual funders and the effect of their observations of others’ funding behaviors on their contribution decisions. Grounded in the literature concerning social influence, crowdsourcing, and helping behaviors, our project aims to develop and examine a framework that captures the social and dynamic process of reward-based crowdfunding from the project creator and funder perspective. We propose that entrepreneurs can proactively influence funder motives, behaviors, and social engagement through a unique reward design and information release strategy. Crucially, social interactions between the project creators and funders influence the effectiveness of the strategy and affect participant funding patterns, decisions, and the financial and social outcomes of current and subsequent projects.This project incorporates longitudinal web data retrieved daily from selected crowdfunding sites and serveral rounds of in-depth interviews and dyadic surveys with entrepreneurs and funders. Our findings contribute to existing literature by providing a systematic and holistic investigation of crowdfunding and feasible strategies for project creators to stimulate and improve the process.