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Successful crowdfunding: the effects of founder and project factors
Abstract
Crowdfunding has been regarded as a novel way of collecting money for innovators to launch products and services by opening their ideas in online. This funding approach is differentiated from a traditional fundraising alternative in terms of project evaluation and risk management. In this paper, we question the reason why some crowdfunding projects are more successful in the context of a pre-ordering model, also known as a reward-based crowdfunding. Data analysis results based on 704 Kickstarter projects showed that founder's prior experiences would influence successful fundraising. User comments and update efforts have positive effects on the increase of success rate. In addition, we examined that the amount of funding goal had negative association with fundraising success.
... Much crowdfunding research has shown efforts to shed light on the concept of success and success factors in crowdfunding: suggesting several interpretations for what is meant by success and success factors. For example, some studies proposed factors that might impact campaigns' success either directly or indirectly (Koch & Cheng;Kim, Por, & Yang;Kim, Por, & Yang, 2016;Butticè, Colombo, & Wright, 2017). These studies have adopted a generalized approach with no regard to the campaign's success outcome and also have largely ignored differences in crowdfunding campaigns clusters. ...
... Much crowdfunding research has shown efforts to shed light on the concept of success and success factors in crowdfunding: suggesting several interpretations for what is meant by success and success factors. For example, some studies proposed factors that might impact campaigns' success either directly or indirectly (Koch & Cheng;Kim, Por, & Yang;Kim, Por, & Yang, 2016;Butticè, Colombo, & Wright, 2017). These studies have adopted a generalized approach with no regard to the campaign's success outcome and also have largely ignored differences in crowdfunding campaigns clusters. ...
... One the other hand, technical factors could be traced to creators' past experience; the success might be positively associated with the number of past created projects (Kromidha & Robson, 2016). Similarly, updates and backers' comments might have a positive impact on the success rate (Kim, Por, & Yang, 2016). Despite the considerable amount of research in crowdfunding success, a generalized approach domi-7 nated the studies measuring either the pledged capital or the success rate among both successful and unsuccessful campaigns. ...
... Many crowdfunding research has focused on the success of business projects and entrepreneurs Frydrych et al. (2014). Kickstarter has received great attention from the researchers due to the considerable success of the platform, and also to the availability of Kickstarter datasets online (Por et al. (2016); De et al. (2015); Mollick (2014); Tran et al. (2016); Etter et al. (2013); Greenberg et al. (2013) to cite a few). The rewards, the goal level and the goal proximity were found to be powerful drivers to contribution motivation Kuppuswamy and Bayus (2017), but what if the reward and the goal variables are inexistent, as it is for donation-based projects? ...
... The participant of the crowdfunding project do not necessarily have an expertise or experience to evaluate the quality of the project, therefore a number of previous researches extracted the individual features from the project page assuming it provides signals to potential participants that could influence their decision. Such, the rewards, the goal and the goal proximity the campaign duration, the number of comments and updates, the description length, the number of medias, etc., were evaluated by the researched and considered to be related to the crowdfunding success (Mollick (2014); Por et al. (2016);Frydrych et al. (2014); Zhou et al. (2018) to cite a few). The project description provides signals about the quality and the credibility of the project; the modest goal and duration provide the signals of the legitimacy, the updates could show an effort and motivation of the project founder Frydrych et al. (2014). ...
... Another dimension along with the project page that were studied by the community is the project owner. Such, a previous experience of the project founder is considered to be the success driver in the literature Por et al. (2016); Zhou et al. (2018) alone with the social capital of the project owner Mollick (2014); Allison et al. (2017); Tran et al. (2016); Zheng et al. (2014); Moisseyev (2013). According to Kuppuswamy and Bayus (2013), the most investors on Kickstarter are one-time participants and assumed to be coming from the social network of the project owner. ...
The Initial Coin Offering (ICO) has emerged as an original way for companies to leverage funding. In this study, we analyze 537 companies that chose the ICO model in 2017 and investigate how their digital social capital is related to the rank of the ICO based on the market capitalization. The goal of this work is to better understand the role of digital social capital in ICO success. Multiple facets of digital presence are analyzed, such as website, ICO activity on social networks like Twitter, the community built and the activeness of the community. We apply an exploratory factor analysis to leverage the main factors that can be used as latent variables, and build an original research model. Structural equation modelling is used for model evaluation and hypothesis testing. Curvilinear analyses allow us to obtain a finer vision of our results. We also verify the robustness of our results in predicting the ICO rank further in time. Our results suggest that social capital is indicative of the ICO performance. The website audience is found to be the most predictive. However, the audience and the centrality of an ICO in the community seems less important than the activeness of an ICO and of the related community on social networks.
... Much crowdfunding research has focused on the success of business projects and entrepreneurs (Frydrych, Bock, Kinder, & Koeck, 2014). Kickstarter has received great attention from researchers due to its considerable success, and due to the availability of Kickstarter datasets (De, B., Lu, & Chen, 2015;Etter, Grossglauser, & Thiran, 2013;Greenberg, Pardo, Hariharan, & Gerber, 2013;Mollick, 2014;Por, Yang, & Kim, 2016;Tran, Dontham, Chung, & Lee, 2016). The rewards, the goal level and the goal proximity were found to be powerful drivers motivating contributions (Kuppuswamy & Bayus, 2017). ...
... The participant of the crowdfunding project does not necessarily have the expertise or experience to evaluate the quality of the project, therefore a number of previous studies extracted the individual features from the project page assuming they provide signals to potential participants that could influence their decision. Therefore the rewards, the goal and the goal proximity the campaign duration, the number of comments and updates, the description length, the amount of media, etc. were evaluated by the researchers and considered to be related to the crowdfunding success (Frydrych et al., 2014;Mollick, 2014;Por et al., 2016;Zhou et al., 2018). The project description provides signals about the quality and the credibility of the project; a modest goal and duration provide signals of the legitimacy; the updates could show the effort and motivation of the project founder (Frydrych et al., 2014). ...
... Another factor, along with the project page, that was studied by the community is the project owner. The previous experience of the project founder is considered to be the success driver in the literature (Por et al., 2016;Zhou et al., 2018) along with the social capital of the project owner Moisseyev, 2013;Mollick, 2014;Tran et al., 2016;Zheng et al., 2014). According to Kuppuswamy and Bayus (2013), most investors on Kickstarter are one-time participants and usually come from the social network of the project owner. ...
Crowdfunding platforms have seen increasing success over the last few years. While crowdfunding by counterparts has been extensively studied, only a very few works have focused on donation-based crowdfunding. The authors analyze Leetchi money-pots and study the impact of project presentations and Twitter campaigns on the success of fundraising. They propose a data-driven approach to determine the social strategies applied by the projects’ owners and their relevance to the success of the crowdfunding process. The authors extracted and computed a set of quantitative indicators using data mining and graph analysis techniques, including the project page and Tweets content, Twitter promoters and message diffusion process. The authors evaluate the predictive power of 70 features on levels of success using a dataset of 1,415 projects with 50,119 project-related tweets. The paper provides recommendations concerning key indicators to be followed and potential strategies to apply when attempting to raise funds on donation platforms.
... Many crowdfunding research has focused on the success of business projects and entrepreneurs Frydrych et al. (2014). Kickstarter has received great attention from the researchers due to the considerable success of the platform, and also to the availability of Kickstarter datasets online (Por et al. (2016); De et al. (2015); Mollick (2014); Tran et al. (2016); Etter et al. (2013); Greenberg et al. (2013) to cite a few). The rewards, the goal level and the goal proximity were found to be powerful drivers to contribution motivation Kuppuswamy and Bayus (2017), but what if the reward and the goal variables are inexistent, as it is for donation-based projects? ...
... The participant of the crowdfunding project do not necessarily have an expertise or experience to evaluate the quality of the project, therefore a number of previous researches extracted the individual features from the project page assuming it provides signals to potential participants that could influence their decision. Such, the rewards, the goal and the goal proximity the campaign duration, the number of comments and updates, the description length, the number of medias, etc., were evaluated by the researched and considered to be related to the crowdfunding success (Mollick (2014); Por et al. (2016);Frydrych et al. (2014); Zhou et al. (2018) to cite a few). The project description provides signals about the quality and the credibility of the project; the modest goal and duration provide the signals of the legitimacy, the updates could show an effort and motivation of the project founder Frydrych et al. (2014). ...
... Another dimension along with the project page that were studied by the community is the project owner. Such, a previous experience of the project founder is considered to be the success driver in the literature Por et al. (2016); Zhou et al. (2018) alone with the social capital of the project owner Mollick (2014); Allison et al. (2017); Tran et al. (2016); Zheng et al. (2014); Moisseyev (2013). According to Kuppuswamy and Bayus (2013), the most investors on Kickstarter are one-time participants and assumed to be coming from the social network of the project owner. ...
La cybersécurité ? De quoi parle-t-on ? Pourquoi faut-il se protéger ? De qui ? Comment ?Cet ouvrage a pour but de donner toutes les informations nécessaires sur ce sujet (contrôle d'accès, ingénierie sociale, logiciels malveillants, communications sécurisées, vulnérabilité du web, sécurité mobile, respect de la vie privée et son cadre juridique, nouvelles technologies, et cybersécurité en entreprise).
... Much crowdfunding research has shown efforts to shed light on the concept of success and success factors in crowdfunding: suggesting several interpretations for what is meant by success and success factors. For example, some studies proposed factors that might impact campaigns' success either directly or indirectly (Koch & Cheng;Kim, Por, & Yang;Kim, Por, & Yang, 2016;Butticè, Colombo, & Wright, 2017). These studies have adopted a generalized approach with no regard to the campaign's success outcome and also have largely ignored differences in crowdfunding campaigns clusters. ...
... Much crowdfunding research has shown efforts to shed light on the concept of success and success factors in crowdfunding: suggesting several interpretations for what is meant by success and success factors. For example, some studies proposed factors that might impact campaigns' success either directly or indirectly (Koch & Cheng;Kim, Por, & Yang;Kim, Por, & Yang, 2016;Butticè, Colombo, & Wright, 2017). These studies have adopted a generalized approach with no regard to the campaign's success outcome and also have largely ignored differences in crowdfunding campaigns clusters. ...
... One the other hand, technical factors could be traced to creators' past experience; the success might be positively associated with the number of past created projects (Kromidha & Robson, 2016). Similarly, updates and backers' comments might have a positive impact on the success rate (Kim, Por, & Yang, 2016). Despite the considerable amount of research in crowdfunding success, a generalized approach domi-7 nated the studies measuring either the pledged capital or the success rate among both successful and unsuccessful campaigns. ...
Crowdfunding success in terms of the achievement of target capital in reward-based crowdfunding projects is impacted by many factors (e.g., past created projects, campaign duration, pledged capital). This paper studies the determinants of success rate (pledged capital/target capital) or (P/T) in successful technological crowdfunding projects. The quantitative study started by data collection of 328 successful Kickstarter technological crowdfunding campaigns which are later decreased to 289 due to model censorship. Tobit model was adopted as the censored linear regression model to determine the existence of relationships between the dependent variable (P/T) and the independent variables. Results suggest that success rate is associated with 7 independent variables: visuals, duration, internal social capital, comments and education are found to impact success rate positively while target capital and past created projects are found to impact success rate negatively. The study contributes to the literature in crowdfunding by paving the path to study success factors that might impact successful technological projects, and to investigate the significance of backers’ feedback and project creators’ education in maximizing their campaign’s outcome.
... In relation to the sector, the crowdfunding campaigns about musical initiatives [12] and non-profit projects [13] has more probabilities to success. In terms of the quantity demanded, it is very important to set reasonable and convincing funding objectives [3, 7 and 14]; and taking into account, that according [15] and [16], the higher the amount requested the more difficult to get it. Moreover, for small quantities a KIA (Keep It All) type campaign is more appropriate, while for large quantities the AON (All Or Nothing) model is better [17]. ...
... In relation to the entrepreneur and related to the above, according to [28] because the majority of the funders are women by homophily, entrepreneurs who are women are more successful in crowdfunding. There is controversial about the entrepreneurs' previous experience and their academic training; for [12], [16] and [20] these items are critical success factors, meanwhile [26] considers them irrelevant factors. ...
... Length of title (Ahmad et al., 2017), (Jiménez & Mendoza, 2013) Number of backers (Li et al., 2018), (Belleflamme et al., 2014) Target amount (Lagazio & Querci, 2018), (Cholakova & Clarysse, 2015) Number of comments (Bannerman, 2013), (Kromidha & Robson, 2016) Number of project likes (Zheng et al., 2014), (Bi et al., 2017) Updates (Kraus et al., 2016), (Gleasure & Morgan, 2018) Length of description (Zhou et al., 2018) Sponsor fans (Zheng et al., 2014) Sponsor likes (Zheng et al., 2014) Sponsor supported projects (Monika & Gabor, 2014), (Colombo et al., 2015) Projects initiated by sponsors (Beaulieu et al., 2015), (Meng et al., 2016) Province of the project (Yuan et al., 2016) Project type (Kuppuswamy & Bayus, 2018) T A B L E 1 2 Model performance after feature selection. Figure 8 shows the ROC curves for each algorithm. ...
Background
Crowdfunding is increasingly favoured by entrepreneurs for online financing. Predicting crowdfunding success can provide valuable guidance for stakeholders. It is a new attempt to evaluate the relative performance of different machine learning algorithms for crowdfunding prediction.
Objectives
This study aims to identify the key factors of crowdfunding, and find the different performance and usage of machine learning algorithms for crowdfunding prediction.
Method
We crawled data from MoDian.com, a Chinese crowdfunding platform, and predicted the crowdfunding performance using four machine learning algorithms, which is a new exploration in this area. Most of the existing literature focuses on empirical analysis. This work solves the problem of predicting crowdfunding performance using a dataset with a minimal number of highly contributive features, which has higher accuracy compared to the regression analysis.
Results
The experiment results show that feature‐selection‐based machine learning models are effective and beneficial in crowdfunding prediction.
Conclusion
Feature selection can significantly improve the prediction performance of the machine learning models. KNN achieved the best prediction results with five features: number of backers, target amount, number of project likes, number of project comments, and sponsor fans. The prediction accuracy was improved by 16%, the precision was improved by 13.23%, the recall was improved by 22.66%, the F‐score was improved by 18.48%, and the AUC was improved by 14.9%.
... However, Kickstarter's funding success rate is only 37%, and Ulule's is only 65%. Project creativity, project advertising exposure, and project duration may affect the success rate of project financing [2]. However, the biggest reason is that there are so many projects on the platform that it is difficult for investors to browse the projects that they are really interested in. ...
In real recommendation systems, implicit feedback data is more common and easier to obtain, and recommendation algorithms based on such data will be more applicable. However, implicit feedback data cannot directly express user preferences. Meanwhile, data sparsity caused by massive data is still an urgent problem to be solved in recommendation system. In response to this phenomenon, this paper proposes a deep collaborative filtering algorithm. In the perspective of implicit feedback, this method uses the advantages of convolutional neural network for effective learning of the nonlinear interaction of users and items and the characteristics of collaborative filtering algorithm for modeling the linear interaction of users and items and combines the two methods for recommendation. Finally, the baseline method is set up and the comparative experiment and parameter adjustment is carried out. The experimental results show that the proposed algorithm has significantly improved the recommendation accuracy on public dataset (Yahoo! Movie). The parameter adjustment results show that, under the condition of uniformly collecting negative feedback data and setting a certain number of convolution layers, the sparser the data is, the better the recommendation performs. As a result, this paper has made some progress in solving the problem of data sparsity and enriching the research of recommendation system.
... Following Yeh and Chen (2020), a list of characteristics was drawn up and its features were correlated with project success. Features were chosen to improve the speculative ability of a classifier and reduce the preparation time by eliminating the inessential factors (Yeh and Chen, 2020;Hong et al., 2016;Barboza, 2017;Hossin and Sulaiman, 2015;Greenberg and Gerber, 2014;Guyon and Elisseeff, 2003). In reverse order of disposal, this study began by considering each of the characteristics and then eliminated the minor significant components every time something was emphasized. ...
Purpose
The purpose of this study is to analyze crowdfunding (CF) as new entrepreneurial finance (EF) tool and to predict the success of CF projects in the Middle East region.
Design/methodology/approach
This study was conducted in seven Middle Eastern countries (i.e. Turkey, Egypt, Iraq, Saudi Arabia, Bahrain, Kuwait and UAE) in addition to serval CF platforms that are commonly used by crowd funders in this region (such as Kickstarter, GoFundMe, Beehive and Zoomal) with total members (195,193). A pilot sample of 20 units was used to validate and verify the research instrument of the study. The research sample consists of 1,910 respondents from the seven countries included in the study. The study emphasizes the partners, micro-structures, administrative conditions and CF advancement in the Middle East.
Findings
The findings reveal that CF’s presence positively impacts fundraising success and that CF platforms are an effective financial technology (Fintech) tool for financing entrepreneurs in the Middle East. The study shows that the success of CF projects in the Middle East can be anticipated by estimating and breaking down enormous information of web-based and social media movement, human resources of funders and online venture introduction. The authors conclude with recommendations for future EF and CF research.
Originality/value
This study aims to analyze the CF and EF principles in the Middle East region as the CF experience and practice in this part of the world tend to be unexplored in terms of research. Presently a very few numbers published research on CF exists. Moreover, to the best of the knowledge, there is no single study investigating CF as an alternative financing source in the Middle East. In particular, the study.
Crowdfunding is an alternative financing method that is different from traditional startup financing. The purpose of this paper is to comprehensively analyze and identify all the factors that significantly affect crowdfunding success by conducting a meta-analysis over previous studies produced in the last decade. An initial pool of 592 studies were collected. Eventually 53 qualified studies were selected and used in the current paper. From these 53 studies, 26 potential factors are carefully extracted and categorized. These factors are then statistically analyzed to decide which ones can significantly affect crowdfunding success. Our results have shown that crowdfunding success depends on a collection of significant factors, which include fundraiser’s human capital, project location, team size, investor’s experience, project quality and the interactivity on the crowdfunding platform. On the other hand, there are also factors such as herd behavior and social platform postings which have no significant effect on crowdfunding success.
O crowdfunding, uma forma de captar pequenas quantias de recursos financeiros de várias pessoas, pode ser uma alternativa para o financiamento da inovação tecnológica. Diante desse contexto, o objetivo desse estudo foi avaliar a contribuição do crowdfunding para inovação tecnológica de produto, serviço ou processo, para micro, pequenas e médias empresas (MPMEs) no Brasil. Foi realizada pesquisa multi-métodos, utilizando estratégia exploratória sequencial, com postura epistemológica objetivista, e corte transversal, com coleta retrospectiva de dados relativos ao período de 2010 a 2016. O nível de análise foi o organizacional e a unidade de análise, as campanhas de crowdfunding para inovação tecnológica, com dados coletados junto aos responsáveis pelas campanhas. Foi realizado estudo de casos múltiplos, na fase qualitativa, com dados primários coletados por meio de entrevistas, que foram transcritas na íntegra, e dados secundários disponíveis nas plataformas. Os dados foram tratados por meio de análise de conteúdo qualitativa, utilizando o software Atlas-ti. Na fase quantitativa foi realizado um survey, com dados coletados por meio de questionário online, auto administrado, que foram analisados por meio do software estatístico SPSS. Os resultados indicam que, no Brasil, há alguns aspectos específicos nos modelos do crowdfunding, e especificidades para projetos de inovação tecnológica. As principais contribuições do crowdfunding para as campanhas da amostra foram: facilidade de captar recursos financeiros sem burocracia, nem exigência de garantia real; captação de recursos financeiros com menos riscos para empreendedores; divulgação do produto, do serviço, do projeto ou da empresa; realização de pré-teste do mercado; obtenção de informações sobre a demanda de um produto/serviço em desenvolvimento ou de produto/serviço inovador; e teste da utilização do crowdfunding para financiamento de produto. O teste de hipóteses indicou que: não há relação entre o valor meta e o grau de sucesso do crowdfunding; não há relação entre o tempo de atividade e o grau de sucesso do crowdfunding; não há diferença estatisticamente significativa da média do grau de sucesso do crowdfunding entre os projetos com finalidade lucrativa e os sem finalidade lucrativa; que campanhas de CF financeiro têm maior média do valor meta e maior média do tempo de atividade das empresas/instituições do que campanhas de CF não financeiro; há relação entre o tempo de atividade e o valor meta; a relação entre o valor meta e o grau de sucesso do crowdfunding não sofre influência da finalidade do projeto, do tipo de CF, do tipo de inovação, do porte da empresa/instituição nem da localização; a relação entre o tempo de atividade e o grau de sucesso do crowdfunding não é influenciada pela finalidade do projeto, pelo tipo de crowdfunding, nem pelo porte da empresa/instituição, mas é influenciada pelo tipo de inovação e pela localização. Análises complementares indicaram que: não há diferença estatisticamente significativa da média do grau de sucesso do crowdfunding entre os tipos de crowdfunding, entre os tipos de inovação, entre os portes das empresas/instituições nem entre as localizações; não há relação entre o valor meta e o percentual de captação; há relação entre o tempo de atividade e o percentual de captação; não há diferença estatisticamente significativa da média do percentual de captação entre as finalidades do projeto, entre os tipos de inovação, entre os portes nem entre as localizações, mas há diferença estatisticamente significativa da média do percentual de captação entre os tipos de crowdfunding. O crowdfunding se mostrou importante para projetos de inovação tecnológica de produto, de serviço e de processo, com ou sem finalidade lucrativa, para empresas de micro, pequeno e médio portes, com diferentes tempos de atividade, e também para campanhas não vinculadas a empresas, em várias regiões do Brasil, atendendo à necessidade de volumes distintos de recursos financeiros, por meio do crowdfunding financeiro e do crowdfunding não financeiro, sem diferenças significativas no grau de sucesso do crowdfunding. Entretanto, há dificuldades, que podem ser minimizadas por meio de ações do governo e de associações para o crowdfunding, visando promover o crescimento do crowdfunding no Brasil.
It is not surprising that the financing of early-stage creative projects and ventures is typically geographically localized since these types of funding decisions are usually predicated on personal relationships and due diligence requiring face-to-face interactions in response to high levels of risk, uncertainty, and information asymmetry. So, to economists, the recent rise of crowdfunding—raising capital from many people through an online platform—which offers little opportunity for careful due diligence and involves not only friends and family but also many strangers from near and far, is initially startling. On the eve of launching equity-based crowdfunding, a new market for early-stage finance in the United States, we provide a preliminary exploration of its underlying economics. We highlight the extent to which economic theory, in particular transaction costs, reputation, and market design, can explain the rise of nonequity crowdfunding and offer a framework for speculating on how equity-based crowdfunding may unfold. We conclude by articulating open questions related to how crowdfunding may affect social welfare and the rate and direction of innovation.
Hundreds of thousands of crowdfunding campaigns have been launched, but more than half of them have failed. To better understand the factors affecting campaign outcomes, this paper targets the content and usage patterns of project updates -- communications intended to keep potential funders aware of a campaign's progress. We analyzed the content and usage patterns of a large corpus of project updates on Kickstarter, one of the largest crowdfunding platforms. Using semantic analysis techniques, we derived a taxonomy of the types of project updates created during campaigns, and found discrepancies between the design intent of a project update and the various uses in practice (e.g. social promotion). The analysis also showed that specific uses of updates had stronger associations with campaign success than the project's description. Design implications were formulated from the results to help designers better support various uses of updates in crowdfunding campaigns.
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.
Two studies examined the impact of online store reviews on consumer trust in online stores. Based on the warranting principle, it was proposed that consumer reviews are a more important cue for judging the trustworthiness of an online store than the overall reputation of the store (Experiment 1) or assurance seals (Experiment 2). The role of dispositional trust was also examined. In both experiments, consumer reviews turned out as the strongest predictor of trustworthiness judgments. Store reputation had no significant effect. In Experiment 1, there was a main effect of dispositional trust on perceived trustworthiness. In Experiment 2, dispositional trust moderated the effects of reviews and assurance seals. High trusters were more influenced by the reviews of other consumers; and only high trusters tended to be influenced by assurance seals. The results show that consumer reviews play an important role in consumer decision making, indicating that online consumer communities indeed empower consumers.
Despite hospitality and tourism researchers’ recent attempts on examining different aspects of online word-of-mouth [WOM], its impact on hotel sales remains largely unknown in the existing literature. To fill this void, we conduct a study to empirically investigate the impact of online consumer-generated reviews on hotel room sales. Utilizing data collected from the largest travel website in China, we develop a fixed effect log-linear regression model to assess the influence of online reviews on the number of hotel room bookings. Our results indicate a significant relationship between online consumer reviews and business performance of hotels.
The basic idea of crowdfunding is for an entrepreneur to raise external finance from a large audience (the "crowd"), where each individual provides a very small amount, instead of soliciting a small group of sophisticated investors. The entrepreneur uses her social networks and established platforms on the Internet to directly interact with the crowd. The paper compares two different forms of crowdfunding: individuals are offered either to pre-order the product, or to advance a fixed amount of money in exchange for a share of future profits. In either case, "crowdfunders" are rewarded by "community benefits" that increase their utility. Using a unified model, we show that the entrepreneur prefers pre-ordering if the initial capital requirement is relatively small, and profit-sharing otherwise. Our conclusions have implications for managerial decisions in the early development stage of firms, since the entrepreneur needs to build a community of individuals with whom she must interact.
An inherent problem that entrepreneurs face at the very beginning of their entrepreneurial initiative is to attract outside capital, given the lack of collateral and sufficient cash flows and the presence of significant information asymmetry with investors. Recently, some entrepreneurs have started to rely on the Internet to directly seek financial help from the general public (the “crowd”) instead of approaching financial investors such as business angels, banks or venture capital funds. This technique, called “crowdfunding”, has made possible to seek capital for project-specific investments as well as for starting up new ventures. In this book chapter (forthcoming in the Handbook of Entrepreneurial Finance at Oxford University Press), we discuss crowdfunding as an alternative way of financing projects, with a focus on small, entrepreneurial ventures. We provide a description of crowdfunding and discusses existing research on the topic, putting crowdfunding into perspective of entrepreneurial finance and thereby describing factors affecting entrepreneurial preferences for crowdfunding as source of finance. We elaborate different business models used to raise money from the crowd, in particular with respect to the structure of the crowdfunding process. Building on this discussion, we present and discuss extensively a case study, namely Media No Mad (a French startup). Finally we conclude with recommendations for entrepreneurs seeking to make use of crowdfunding and with suggestions for researchers about yet unexplored avenues of research.
Services marketing strategy focuses on delivering processes, experiences, and intangibles – rather than physical goods and discrete transactions – to customers. Delivering experiences successfully and building customer relationships are complicated undertakings involving many different strategies and tactics. Successful services marketing strategy also involves integrating a focus on the customer throughout the firm and across all functions. All company functions – marketing, selling, human resources, operations, and R&D – must work together to create effective services marketing strategy. Although companies have often found it difficult to attack service problems in an organized manner, a well-established model called the gaps model provides a framework for focusing on the customer and describes the approaches necessary to close the gap between customer expectations and perceptions. This article discusses services marketing strategy in the context of the gaps model, demonstrating that closing the all-important customer gap is a function of closing four gaps on the service provider side: the listening gap, the service design and standards gap, the performance gap, and the communication gap.
Keywords:
services marketing strategy;
gaps model of service quality;
service excellence
In this paper we report research results investigating microblogging as a form of electronic word-of-mouth for sharing consumer opinions concerning brands. We ana- lyzed more than 150,000 microblog postings containing branding comments, sentiments, and opinions. We inves- tigated the overall structure of these microblog postings, the types of expressions, and the movement in positive or negative sentiment. We compared automated methods of classifying sentiment in these microblogs with man- ual coding. Using a case study approach, we analyzed the range, frequency, timing, and content of tweets in a corporate account. Our research findings show that 19% of microblogs contain mention of a brand. Of the brand- ing microblogs, nearly 20% contained some expression of brand sentiments. Of these, more than 50% were posi- tive and 33% were critical of the company or product. Our comparison of automated and manual coding showed no significant differences between the two approaches. In analyzing microblogs for structure and composition, the linguistic structure of tweets approximate the linguistic patterns of natural language expressions. We find that microblogging is an online tool for customer word of mouth communications and discuss the implications for corporations using microblogging as part of their overall marketing strategy.
A separate and distinct interaction with both the actual e-vendor and with its IT Web site interface is at the heart of online shopping. Previous research has established, accordingly, that online purchase intentions are the product of both consumer assessments of the IT itself-specifically its perceived usefulness and ease-of-use (TAM)-and trust in the e-vendor. But these perspectives have been examined independently by IS researchers. Integrating these two perspectives and examining the factors that build online trust in an environment that lacks the typical human interaction that often leads to trust in other circumstances advances our understanding of these constructs and their linkages to behavior. Our research on experienced repeat online shoppers shows that consumer trust is as important to online commerce as the widely accepted TAM use-antecedents, perceived usefulness and perceived ease of use. Together these variable sets explain a considerable proportion of variance in intended behavior. The study also provides evidence that online trust is built through (1) a belief that the vendor has nothing to gain by cheating, (2) a belief that there are safety mechanisms built into the Web site, and (3) by having a typical interface, (4) one that is, moreover, easy to use.
Customer reviews are increasingly available online for a wide range of products and services. They supplement other information provided by electronic storefronts such as product descriptions, reviews from experts, and personalized advice generated by automated recommendation systems. While researchers have demonstrated the benefits of the presence of customer reviews to an online retailer, a largely uninvestigated issue is what makes customer reviews helpful to a consumer in the process of making a purchase decision. Drawing on the paradigm of search and experience goods from information economics, we develop and test a model of customer review helpfulness. An analysis of 1,587 reviews from Amazon.com across six products indicated that review extremity, review depth, and product type affect the perceived helpfulness of the review. Product type moderates the effect of review extremity on the helpfulness of the review. For experience goods, reviews with extreme ratings are less helpful than reviews with moderate ratings. For both product types, review depth has a positive effect on the helpfulness of the review, but the product type moderates the effect of review depth on the helpfulness of the review. Review depth has a greater positive effect on the helpfulness of the review for search goods than for experience goods. We discuss the implications of our findings for both theory and practice.
This article analyzes the economics of small business finance and the private equity and debt markets in which these businesses raise funds. The framework used is a financial growth cycle paradigm, in which the optimal choice among capital structures differs over the cycle. We also show the actual capital structure of small business and how this structure varies with the size and age of the firm. In addition, we analyze a number of research and policy issues, review the relevant literature, and suggest topics for future research.
We examine the economics of financing small business in private equity and debt markets. Firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle. We show the sources of small business finance,and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of research and policy issues, review the literature, and suggest topics for future research.
Without secure commercial information exchange and safe electronic financial transactions over mobile networks, neither service providers nor potential customers will trust mobile commerce. Various mobile security procedures and payment methods have been proposed and applied to mobile commerce, and this chapter attempts to provide a comprehensive overview of them. A secure mobile commerce system must have the following properties: (i) confidentiality, (ii) authentication, (iii) integrity, (iv) authorization, (v) availability, and (vi) non-repudiation. This chapter discusses the security issues related to the following three network paradigms: (i) wireless local area networks, (ii) wireless wide area networks, and (iii) WAP. Among the many themes of mobile commerce security, mobile payment methods are probably the most important. A typical mobile payment process includes: (i) registration, (ii) payment submission, (iii) authentication and authorization by a content provider, and (iv) confirmation. This chapter also describes a set of standards for mobile payments.
Without secure commercial information exchange and safe electronic financial transactions over mobile networks, neither service providers nor potential customers will trust mobile commerce. Various mobile security procedures and payment methods have been proposed and applied to mobile commerce, and this chapter attempts to provide a comprehensive overview of them. A secure mobile commerce system must have the following properties: (i) confidentiality, (ii) authentication, (iii) integrity, (iv) authorization, (v) availability, and (vi) non-repudiation. This chapter discusses the security issues related to the following three network paradigms: (i) wireless local area networks, (ii) wireless wide area networks, and (iii) WAP. Among the many themes of mobile commerce security, mobile payment methods are probably the most important. A typical mobile payment process includes: (i) registration, (ii) payment submission, (iii) authentication and authorization by a content provider, and (iv) confirmation. This chapter also describes a set of standards for mobile payments.
The purpose of this study is to investigate differences in time pressure and information between two broad classes of promotional offers: (1) “advanced receipts” in which consumers are encouraged to expedite the purchase of a good or service to take advantage of coupons, rebates, price-offs, premiums, etc.; and (2) “delayed payments,” in which consumers are urged to “buy now and pay later.” A content analysis of 222 promotional offers was conducted using the time and outcome valuation model as a theoretical basis for understanding the role of time pressure in terms of time allowed before the offer expiration as well as copy and information in these different types of promotional offers. The findings indicate that delayed payment offers allow less time to participate than advanced receipt offers, have more time pressure copy for those promotional offers giving a deadline and provide more information.
There are many factors that contribute to the success of a project on crowdfunding sites, such as Kickstarter. These include, but are not limited to, the specified project goal of funding, the success of similar projects, the funder incentives, the amount and type of information given on project webpage, the credentials and trustworthiness of project creators. Every successful project on Kickstarter has a project video, which introduces the product. This thesis analyzed four attributes of the project video to determine the success of the project, i.e. whether or not the project received the requested funding. These attributes included the trustworthiness of creators, level of demo of product, finish of product and amount of excitement engendered by video. A survey of undergraduate students was conducted, in which participants were asked to rank each of these attributes for videos of both successful and unsuccessful projects. The results are discussed.
Most B2C websites provide consumers with two types of electronic Word-of-Mouth (eWOM) information, namely aggregated rating and individual review. The present research investigates the effects of a conflicting aggregated rating on the perceived credibility and diagnosticity of individual reviews. The results of our laboratory experiment demonstrate that the presence of a conflicting aggregated rating will decrease review credibility and diagnosticity via its negative effect on consumers' product-related attributions of the review. In addition, these effects are more salient for positive reviews than for negative ones. These findings contribute to a better understanding of the interactions between different types of eWOM information and provide practitioners with actionable suggestions on how to improve the design of their eWOM systems.
Purpose – Crowdfunding implies mobilizing the crowd to finance projects which are posted on dedicated websites, known as crowdfunding platforms. Funding is provided by web users in exchange for some claims on the project revenues, or for a reward, or simply for donation. In this paper, we aim at learning more on what determines the probability of a project to reach the target funding. We apply the lens of social capital, defined by the goodwill available to her/him from the structure and content of his/her social relations (Adler and Kwon 2002). In particular we distinguish between ‘individual’ (exclusive) and ‘territorial’ (locally shared) social capital. Design/methodology/approach – We test our hypotheses by running Probit estimates on a sample of 461 crowdfunding projects posted by 699 proponents and hosted on 11 Italian crowdfunding platforms. The focal dependent variables deal with the individual social capital and geographically localized social capital. The former is proxied by the number of contacts of proponents on digital social networks (i.e. Facebook). To account for the latter, we refer to the municipality of residence of each proponent and resort to the traditional measure of localized social capital used in the literature. We control also for a set of project-specific variables. Originality/value –This methodology puts in evidence that in a framework with information asymmetry individual social capital (ISC) is positively and significantly correlated with the probability of success of a crowdfunding project, providing a positive signal to crowdfunders. On the contrary, we do not find any significant correlation with the diffused territorial social capital (TSC). By jointly considering the impact of ISC and TSC, we find that TSC weakens the signal provided by ISC. We posit that such result is a consequence of an ‘adverse-selection’ problem. Good-quality projects may more easily collect money on a territorial basis if TSC is large. Therefore crowdfunding projects originated in large-TSC milieus ceteris paribus are less easily financed by crowdfunders. Practical implications – Our work has interesting managerial implications. Individual social capital impacts on the success of crowdfunding projects and interacts with geolocalized territorial social capital. Accordingly, proponents, funders and managers of crowdfunding platforms who are interested in selecting potentially successful projects must consider such interaction, and carefully evaluate both individual and territorial social capital.
Online reviews, a form of online word-of-mouth (eWOM), have recently become one of the most important sources of information for modern consumers. Recent scholarship involving eWOM often focuses on the transmission and impact of online reviews but sheds less light on the underlying processes that drive consumers’ receptions of them. Similarly, few studies have explored the recipients’ perspectives in the context of various services. This study addresses the aforementioned gaps in extant literature. The research model in this study is built upon the rich stream of literature related to how people are influenced by information and is tested on reviews collected from Yelp.com, a popular online advisory website dedicated to services businesses throughout the United States. The results of the study show that a combination of both reviewer and review characteristics are significantly correlated with the perceived usefulness of reviews. The study also finds several results that are anomalous to established knowledge related to consumers’ information consumption, both offline and online. The authors present the results of the study and discuss their significance for research and practice.
This paper presents an initial empirical examination of which start-up signals will induce small investors to commit financial resources in an equity crowdfunding context. We examine the impact of firms’ financial roadmaps (e.g., preplanned exit strategies such as IPOs or acquisitions), external certification (awards, government grants and patents), internal governance (such as board structure), and risk factors (such as amount of equity offered and the presence of disclaimers) on fundraising success. Our data highlight the importance of financial roadmaps and risk factors, as well as internal governance, for successful equity crowdfunding. External certification, by contrast, has little or no impact on success. We also discuss the implications for successful policy design.
This study explores whether and how different online platforms to which electronic word of mouth (eWOM) communication is posted influence consumers’ judgements of reviewed products. Additionally, this study examines the moderating role of the valence of eWOM on the platforms–consumer product judgement relationship. Our findings indicated that, other things being equal, participants exposed to the review posted on the personal blog were more likely to attribute the review to circumstances and less likely to recommend the product to friends than those who were exposed to the review either on the independent review website or the brand’s website. The effect of the eWOM platforms on consumer willingness to recommend the product to friends was found only when the review was positive. When the review was negative, however, there were detrimental effects on consumer willingness to recommend the product to friends regardless of the eWOM platform. Practical and theoretical implications of the findings were discussed.
The combination of limited individual information and costly information acqui-sition in markets for experience goods leads us to believe that significant peer effects drive demand in these markets. In this paper we model the effects of peers on the demand patterns of products in the market experience goods microfund-ing. By analyzing data from an online crowdfunding platform from 2006 to 2010 we are able to ascertain that peer effects, and not network externalities, influence consumption.
The tremendous amount of information available online has resulted in considerable research on information and source credibility. The vast majority of scholars, however, assume that individuals work in isolation to form credibility opinions and that people must assess information credibility in an effortful and time-consuming manner. Focus group data from 109 participants were used to examine these assumptions. Results show that most users rely on others to make credibility assessments, often through the use of group-based tools. Results also indicate that rather than systematically processing information, participants routinely invoked cognitive heuristics to evaluate the credibility of information and sources online. These findings are leveraged to suggest a number of avenues for further credibility theorizing, research, and practice.
Trust is emerging as a key element of success in the on-line environment. Although considerable research on trust in the offline world has been performed, to date empirical study of on-line trust has been limited. This paper examines on-line trust, specifically trust between people and informational or transactional websites. It begins by analysing the definitions of trust in previous offline and on-line research. The relevant dimensions of trust for an on-line context are identified, and a definition of trust between people and informational or transactional websites is presented. We then turn to an examination of the causes of on-line trust. Relevant findings in the human–computer interaction literature are identified. A model of on-line trust between users and websites is presented. The model identifies three perceptual factors that impact on-line trust: perception of credibility, ease of use and risk. The model is discussed in detail and suggestions for future applications of the model are presented.
A questionnaire was administered to one hundred venture capitalists to determine the most important criteria that they use to decide on funding new ventures. Perhaps the most important finding from the study is direct confirmation of the frequently iterated position taken by the venture capital community that above all it is the quality of the entrepreneur that ultimately determines the funding decision. Five of the top ten most important criteria had to do with the entrepreneur's experience or personality. There is no question that irrespective of the horse (product), horse race (market), or odds (financial criteria), it is the jockey (entrepreneur) who fundamentally determines whether the venture capitalist will place a bet at all.
The credibility of web sites is becoming an increasingly important area to understand. To expand knowledge in this domain, we conducted an online study that investigated how different elements of Web sites affect people's perception of credibility. Over 1400 people participated in this study, both from the U.S. and Europe, evaluating 51 different Web site elements. The data showed which elements boost and which elements hurt perceptions of Web credibility. Through analysis we found these elements fell into one of seven factors. In order of impact, the five types of elements that increased credibility perceptions were “real-world feel”, “ease of use”, “expertise”, “trustworthiness”, and “tailoring”. The two types of elements that hurt credibility were “commercial implications&rdquo ;and “amateurism”. This large-scale study lays the groundwork for further research into the elements that affect Web credibility. The results also suggest implications for designing credible Web sites.
The relationship between user participation and information system (IS) success has drawn attention from researchers for some time. It is assumed that strong participation of future users in the design of IS would lead to successful outcomes in terms of more IS usage, greater user acceptance, and increased user satisfaction. However, in spite of this, much of the empirical research so far has been unable to demonstrate its benefits. This paper examines the participation–success relationship in a broader context, where the effects of user participation and two other factors, user attitudes and user involvement, on system success occur simultaneously. Other contingency variables considered here are: system impact, system complexity, and development methodology. The theoretical framework and the associated hypotheses are empirically tested by a survey of 32 organizations. Empirical results corroborate the positive link between user participation and user satisfaction and provide evidence on the interplay between user attitudes and user involvement.
It is an open question as to how impressions formed via computer-mediated communication (CMC) differ from those formed face-to-face (FtF). Some research suggests that judgments of others formed while interacting over CMC are more favorable than judgments formed in FtF, while other researchers argue the pattern is in the opposite direction. We sought to settle this conflict by examining impressions formed via each communication mode while controlling for the other. Participants interacted with a partner twice: once FtF and once CMC. When controlling for each communication mode, participants interacting FtF, formed more positive impressions of their partner than did those in the other sequence. Furthermore, FtF participants had greater self-other agreement then those who interacted via CMC. Implications for impressions formed over the Internet are discussed.
The personal relationships that companies once had with customers degenerated into the cold automaticity of data- gathering with the widespread adoption of management information systems. By restoring a human face to a company's self-presentation, blogging has been heralded as a paradigm shift in the way companies interact with customers. This study tests a model relating the content of an author's blog posts to readers' responses. It suggests that companies can use blogging to complement customer relationship management processes to the extent their customers exhibit an organic desire to commune by combining provocative informational content with expressions of benevolent intent. Such consumers respond well to these overtures, showing evidence of increased subject-matter involvement, liking and trust. The study also proposes a way to measure diversity of thought in reader comments to guard against being unduly swayed by a vocal minority.
This paper investigates how angel investors’ human capital affects the valuation of their portfolio companies at initial investment, based on the pre-money valuation of 59 investments in young Belgian companies. We show that entrepreneurs are able to negotiate higher valuations with angel investors who have a business degree, more entrepreneurial experience or previous professional law experience. As such, this result is in contrast with the behavior of venture capital investors. Angel investors with financial experience, however, value their investments lower: their financial background leads them to stress the financial side of the deal more.
A validated model of trust was used as a framework for an empirical study to identify on- and offline factors that influence gamblers' perception of an online casino's trustworthiness. The results suggest that the quality with which casinos address gamblers' trust concerns by providing appropriate content is the prime factor. However, designing for trust must be part of a consistent strategy that also involves customer service and usability.
Signaling in equity crowdfunding. Entrepreneurship Theory and Practice
- G K Ahlers
- D Cumming
- C Günther
- D Schweizer
Kickstarter for Dummies
- A Cebulski
Cebulski, A. 2013. Kickstarter for Dummies. John Wiley &
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Kickstarter For Dummies, For Dummies
- Aimee Cebulski
Doctoral dissertation
- R Fernandes
Handbook of Entrepreneurial Finance
- A Schwienbacher
- B Larralde
Perceived 'usefulness' of online consumer reviews: An exploratory investigation across three services categories, Electronic Commerce Research and Applications
- Pradeep Racherla
- Wesley Friske