Mention, Retweet, Like: Effect of Social Media on Crowdfunding Success

Crowdfunding platforms have provided opportunities for entrepreneurs to seek initial capital from a large number of customers. To reach out to more customers, entrepreneurs capitalize on social broadcasting channels such as Twitter and Facebook. The microblogging enables both entrepreneurs and customers to generate an enormous word-of-mouth (WOM) on the online environments. Although such electronic WOM is becoming increasingly important, how such WOM about a product or a campaign can impact customers’ decision on funding is not well understood. We explore the applicability of two classes of models – social influence, and social contagion to explain differential effects of online WOM on funding performance in the context of reward-based crowdfunding. Social influence occurs when individuals’ decision largely depends on the popularity of the information, whereas contagion occurs when individuals’ decision is affected by interaction with others’ experience. We investigate whether and how Facebook and Twitter MWOM affect funding outcomes by estimating a dynamic panel data model. The study includes three data sources of information to examine empirically how customer-driven promotional activities and customer engagement on social media influence funding performance. MWOM is likely to play a role because the decision to support a project requires extensive information acquisition from multiple sources. The preliminary result shows the importance of volume of MWOM on funding outcomes.