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Communicating During Societal Crises: How Entrepreneurs’ Interactions with Backers Affect Fundraising via Crowdfunding
Abstract
We investigate how entrepreneurs communicate with crowdfunding backers during the onset of a societal crisis via a content analysis of campaigns active during the COVID-19 pandemic and a vignette experiment. While effective communication with stakeholders is critical for acquiring resources during societal crises, little is known about what communication strategies entrepreneurs use during these crises or their influence on fundraising. Notably, we find that entrepreneurs’ crisis communication strategies differ along three key dimensions: timing (proactive vs. reactive), target (entrepreneur vs. other), and nature (utilitarian vs. personal), and that proactively addressing other stakeholders’ personal concerns attracts more funding than alternative approaches.
... In this manuscript, we have undertaken some changes to the original EEF (Davidsson et al., 2020) that we think are well motivated. In the EE characteristics chapter, we discussed controllability as a possible, additional EE characteristics (see also Kim, 2023;McKenny et al., 2024) and trajectory as alternative to onset, but did not incorporate these in the general outline of the updated EEF. In the mechanism chapter we focused on pruning and clarification rather than inclusion of new mechanisms. ...
The term 'external enabler' (EE) is a collective label for non-trivial changes to emerging and established organizations' (macro) environment, such as new technologies, regulatory changes, demographic and sociocultural trends, and changes to the natural environment. Two fundamental assumptions of EE scholarship are that all such changes benefit some organizations, and that different types of change can offer similar benefits and strategic potentials for strategic action. The external enabler framework (EEF) develops structure and vocabulary to guide cumulative knowledge development across different types of such environmental changes to inspire and guide research and practice regarding strategic and fortuitous leveraging of EEs in entrepreneurial pursuits. Citation statistics and a growing number of applications and extensions suggest that the EEF has been well received, and its application area has expanded well beyond its original domain of independent business startups to also include mission-oriented ventures, new initiatives and growth of established organizations of all sizes and ages, and the creation or rejuvenation of industries, ecosystems, and local economies. In this article, we update and elaborate on the EEF and review the scholarship that has evolved around it to take stock of past developments and guide and inspire future research and practice in this important domain.
Crowdfunding is a relatively nascent, rapidly growing phenomenon whereby individuals or ventures pursue funding from a potentially large number of backers via the Internet. This rapidly emerging literature invites a variety of conceptual lenses and offers significant potential to advance theoretical understanding of important organizational activities, such as how entrepreneurs and organizations are evaluated by external stakeholders or how the crowdfunding process shapes the strategic decisions of emerging organizations. Our integrative review seeks to discover how the extant body of crowdfunding research challenges, extends, and contributes to the theoretical understanding of management and organizational phenomena and how these insights might drive further theoretical advancement. To do so, we inductively identify ten dominant topics that span the crowdfunding landscape across disciplines (268 articles) and synthesize the major findings within each topic based on relevant theoretical concepts. In doing so, we highlight how each topic area has applied and advanced various organizational theories. We then leverage the ten topics to articulate opportunities for future research uncovered by our review that provide potential contributions to theories germane to the management literature and to guide the next decade of crowdfunding research.
This paper explores the potential to address mid-crisis communication needs in longitudinal crises by using a paired renewal discourse and inoculation messaging strategy. While renewal discourse focuses on inherent opportunities and the possibility for organizations to improve following a crisis, insulating stakeholder views from ongoing and future crisis effects with inoculation messaging during the crisis can improve the durability of positive outcomes. Theoretically driven rhetorical analysis is used to examine stakeholder communication from one of the two firms that survived The Weekend Wall Street Died in September 2008, a midpoint in the 18-month global financial meltdown. The results demonstrate mid-crisis as a distinct communication exigency and the applied use of a paired renewal discourse and inoculation strategy as a crisis and ongoing risk management approach.
How can entrepreneurs protect their wellbeing during a crisis? Does engaging agility (namely, opportunity agility and planning agility) in response to adversity help entrepreneurs safeguard their wellbeing? Activated by adversity, agility may function as a specific resilience mechanism enabling positive adaption to crisis. We studied 3,162 entrepreneurs from 20 countries during the COVID-19 pandemic and found that more severe national lockdowns enhanced firm-level adversity for entrepreneurs and diminished their wellbeing. Moreover, entrepreneurs who combined opportunity agility with planning agility experienced higher wellbeing but planning agility alone lowered wellbeing. Entrepreneur agility offers a new agentic perspective to research on entrepreneur wellbeing.
Research Summary
Although reward-based crowdfunding is lauded for its promise to democratize funding for innovation, claiming innovation in campaign texts has an ambiguous link to crowdfunding performance. We draw from Expectancy Violations Theory (EVT) and, in a field study of 2,185 Kickstarter campaigns, find that innovation claims yield better fundraising performance for women than men, particularly in male-stereotyped categories. An experiment did not identify the expected indirect effects of innovation claims on crowdfunding performance through ability trustworthiness. However, it revealed that women are perceived as more able when launching campaigns in male-stereotyped categories, suggesting that EVT and ability perceptions may still play an important but unhypothesized role. We extend research on the role of gender in crowdfunding and strategic entrepreneurship and make several suggestions for future research.
Managerial Summary
The value of making innovation claims in reward-based crowdfunding is ambiguous, creating an unclear picture of how entrepreneurs should present new products on these platforms. In a field study of 2,185 Kickstarter campaigns, we show that female entrepreneurs benefit more from making innovation claims than their male peers, especially in male-dominated categories. While we suggested that these effects occur due to differences in backers' perceptions of the entrepreneur's ability, this mechanism was not supported in an experiment. However, we found that women are perceived as more able when launching crowdfunding campaigns in male-dominated industry categories. Taken together, our research suggests that in reward-based crowdfunding, women might benefit from violating gender expectations when backers view these violations as either positive or ambiguous.
The voice is often the only continuous channel of expression in pitch videos. We isolate the influence of entrepreneurs' vocal expressions on funding by examining how valence (positivity/negativity) and arousal (activation) shape funders' perceptions of passion and preparedness. We show that an entrepreneur's high-arousal vocal expressions, whether positive or negative, increase perceptions of their passion. Entrepreneurs are perceived as more prepared when the valence and arousal of their vocal expressions are congruent. We test our hypotheses in the context of rewards-based crowdfunding, using both an experiment and a speech affect analysis of real-world crowdfunding pitches.
Despite the increasing interest in studying the concept of resilience in entrepreneurship, existing research often fails to account for stressors that induce entrepreneurs' need for resilience and coping efforts. By arguing the need to study stress, resilience, and coping together to understand how entrepreneurs build resilience in the face of adversities, we systematically review the en-trepreneurship scholarship (125 articles) on these three concepts. By critically appraising these three literatures in light of current thinking in psychology, we then develop a model of the process of building psychological resilience in entrepreneurship and offer a clear pathway for future research.
Plain English Summary
As an entrepreneur (during the COVID-19 pandemic), start looking for support in online communities—they are more than just knowledge repositories! While access to support is severely hampered by social distancing measures during the COVID-19 pandemic, entrepreneurs can still access support in online communities. Yet, depending on how entrepreneurs approach them, communities offer more than just simple advice: depending on how entrepreneurs frame their posts and interact with the community, they can manage what support they receive from online communities. (1) Online communities can help resolve problems and collect critical resources in times of crisis, such as digital marketing tools to compensate client loss. (2) Online communities can support entrepreneurs to waterproof ideas in early venture stages through feasibility checks so that entrepreneurs can better evaluate opportunities. (3) Online communities can help understand and reflect on new emerging topics, such as work from home. (4) Online communities can provide tailor-made plans for entrepreneurs by engaging in frequent interaction with support seekers. Taken together, online communities can assist entrepreneurs in their actions which are especially important in times of great uncertainty.
In the context of the external disruption presented by the COVID-19 pandemic, we investigate (1) how individual-level resilience and inter-functional coordination relate to organizational resilience and (2) the link between organizational resilience and firm performance. We view organizational resilience as a resource-based capability and draw on insights regarding psychological capital and relational resources to inform our hypotheses. Our hypotheses are tested with a time-lagged, multi-level study of young technology ventures. The results show that when such firms are resilient, they tend to perform significantly better in a crisis. Further, organizational resilience is positively influenced by the individual resilience of top management team members, as well as inter-functional coordination. We discuss implications for theory and practice and suggest avenues for research on resilience in entrepreneurship.
Purpose
This study examines the association between firm profitability and the “voice” of the CEO measured through tones they convey in their annual letter to shareholders. The paper examines whether the tones corresponds to a firm's profitability and the extent to which CEO tone varies with changes in profitability.
Design/methodology/approach
The authors analyze 187 Australian CEOs communications in 748 annual letters to their shareholders between 2010 and 2013. Two-word lists created by previous researchers are used to assess tones for their positive-negative plurality, uncertainty and use of modal words. Firm profitability is identified using return on assets. The authors examine the relationship between profitability and tones using simple ANOVA as well as a linear mixed model and then a change (differences) model. The change model captures any inertia or genre effect in the CEO letter to shareholders.
Findings
Using both the level and change model, the authors find that firm profitability is associated with CEO's tones that are more optimistic and less pessimistic. The authors also find that the use of negative words has more communicative value than positive words or “net” positive words. The authors also observe some genre effect when CEOs use strong modal words.
Research limitations/implications
The sample is restricted to a selection of Australian firms that had the same CEO for the fiscal years 2010–2013; which reported in each financial year and which survived the global financial crisis. Generalizing the findings to other periods, types of firms, or to CEOs with shorter tenure, might be questionable. This study was conducted in Australia, which may limit the applicability of the findings to other jurisdictions.
Practical implications
The significant link between firm profitability and CEOs' use of positive, net positive and negative words implies that investors may place reliance on the use of these tones in the CEO's annual letter to accurately reflect the profitability of the firm.
Originality/value
The study extends the existing literature by examining whether a change in firm profitability is linked to a change in CEO tone. It concludes that even in periods of general financial stress, shareholders should be confident that CEOs' letters to shareholders provide credible information that corresponds to firm performance.
The enabling influence of environmental changes—be they technological, regulatory, demographic, sociocultural, or otherwise—on emerging ventures receives a growing interest from researchers and practitioners. To support knowledge accumulation in this important area, we systematically review and integrate research that is dispersed across disciplines, nominal types of change, and theoretical approaches. Under a unified terminology within a cross-level (environment to agent), process-aware framework, we examine what has been done and learnt. On this basis, we develop an agenda for further, future accumulation of knowledge about the strategic and serendipitous influence of environmental changes throughout and beyond the venture creation process.
For decades, entrepreneurship and strategy research has been dominated by agent-centric and inward-looking theoretical perspectives. The ongoing COVID-19 pandemic demonstrates the limits of this stance, as its influence on business has been both enormous and palpable. For the most part, the effects of the pandemic are no doubt negative. Business research—and presumably business practice—typically address such influence in terms of failure, resilience, and crisis management among existing businesses. Contrasting this prevalent discourse, we focus instead on positive influence of the pandemic for some emerging and new ventures. We analyze the many possible positive effects on entrepreneurship practice and highlight also positive effects on entrepreneurship research. We illustrate both positives by applying the External Enabler framework.
JEL CLASSIFICATION: L26, M13, O3, R11
In recent years, entrepreneurs have increasingly turned to crowdfunding, a new form of entrepreneurial finance, to fund projects. Whilst research has shown that signals originating from the entrepreneur and project can affect the outcome of crowdfunding, how different signals work together under different signalling environments remains underexplored. Drawing on signalling theory, we examine how signals of entrepreneurs’ credibility (success, failure, backer and industry experience) and project quality (preparedness and third-party endorsements) produce crowdfunding success in different signalling environments. We collected a unique dataset with matched projects listed on both Kickstarter and Indiegogo, but with different funding models, to represent two distinct signalling environments. Results based on qualitative comparative analysis (QCA) identify two distinct signalling patterns that show entrepreneur’s credibility and project quality signals can complement each other to produce crowdfunding success. In an environment with less uncertainty, entrepreneur’s credibility in terms of crowdfunding experience can also compensate absent project quality to produce crowdfunding success. In an environment with higher uncertainty, entrepreneur’s credibility and project quality need to be both present to establish the necessary legitimacy for crowdfunding to be successful. Furthermore, by integrating positive (i.e. success) and negative (i.e. failure) signals, we demonstrate how signal incongruence can enhance crowdfunding success.
Plain English Summary Failure experience is an important signal in achieving crowdfunding success, but its effectiveness depends on other signals as well as the signalling environment. Our study shows how crowdfunding success can be achieved in multiple ways and that the path to success depends on the funding model of the platform used. For entrepreneurs to demonstrate credibility, backer experience and project preparedness are important. Both are under the control of the entrepreneur and well worth considering investing effort into. Importantly, the study also shows that demonstrating failure experience is important in achieving crowdfunding success. Failure experience can either replace the lack of prior success experience by demonstrating a track record of learning or it can enhance prior success experience by producing a more realistic picture of the entrepreneurs. Thus, the study offers practical implications for entrepreneurs on how to use different signals to increase the likelihood of success in reward-based crowdfunding.
The use of Amazon’s Mechanical Turk (MTurk) in management research has increased over 2,117% in recent years, from 6 papers in 2012 to 133 in 2019. Among scholars, though, there is a mixture of excitement about the practical and logistical benefits of using MTurk and skepticism about the validity of the data. Given that the practice is rapidly increasing but scholarly opinions diverge, the Journal of Management commissioned this review and consideration of best practices. We hope the recommendations provided here will serve as a catalyst for more robust, reproducible, and trustworthy MTurk-based research in management and related fields.
In many markets, there are mediators whose public evaluations mark that a new entrepreneur has gained legitimacy. Their decision may be influenced by third-party sources signaling about the entrepreneur. We quantitatively study these micro-level processes in the art market, where the artist is the entrepreneur and the art gallery is the mediator. Our results show that it is not the quantity but the diversity of signaling sources, especially highly credible ones, that influence a mediator’s decision. This allows entrepreneurs full access to the market under the consensus that “proper” legitimacy has been gained. Our conclusions are maintained under alternative analyses.
The purpose of the study was to investigate risk disclosure in listed Greek companies. The effects of the financial crisis were also considered. The study aimed to determine the risk reporting practices of Greek non-financial companies listed on the Athens Stock Exchange through a content analysis of their annual reports.
Risk identification and anticipation protect businesses and create shareholder value. In recent years, particularly since the economic crisis, risk has become one of the most important business issues. The study concluded that during the crisis, there was an increase in disclosure. Financial, personnel and legal risks were the most reported types of risk. The study also found liquidity to be a very important issue.
Content analysis has limitations because subjectivity cannot be eliminated. This study measured only the quantity, not the quality, of risk disclosure. The quality of risk reporting will be examined in future research.
This is the first study on risk disclosure in the non-financial companies listed on the Athens Stock Exchange to conduct a content analysis of the corporate annual reports.
Crowdfunding has emerged as an important alternative financing tool for entrepreneurs. Extant research on the antecedents of crowdfunding success have produced divergent results. By applying the cross-disciplinary lens of strategic linguistic framing, that is, framing campaign messages in a way that is salient and that resonates with the values of the audience, we experimentally examine the role of value framing for a successful campaign outcome. Our results indicate that altruistically framed campaigns have a higher chance for funding compared to campaigns that emphasize egoistic or environmental motives, but even more importantly, that message framing needs to be aligned with the personal values of the backers. As such, our study highlights important similarities between resource mobilization in social movements and in crowdfunding.
This research examines how potential backers form mental representations of products in reward-based crowdfunding campaigns, and how these representations affect funding decisions and campaign performance. To test our framework, we conducted four experiments and also drew on a sample of 961 Kickstarter campaigns. Our results show that two campaign characteristics – the product's development stage and the indicated time to product delivery – determine the psychological distance that supporters experience in response to a campaign, and that psychological distance, in turn, inhibits individual campaign contributions and cumulative campaign success. Furthermore, we find that encouraging supporters to imagine the benefits of product usage is an effective means to increase support for campaigns that elicit high psychological distance.
In this study, we integrate the insights of consumption value theory and the crowdfunding literature to develop a value-based view of crowdfunding rewards to systematically theorize and synthesize the underlying mechanisms through which the various rewards offered by crowdfunding projects can incentivize crowdfunders’ backing decisions. Identifying three basic value dimensions carried by different crowdfunding rewards—utilitarian value, socioemotional value, and participatory value, our value-based view posits that these three values satisfy crowdfunders’ different needs and thus motivate them to back a project on distinct grounds and considerations. Through this view, the performance of a crowdfunding project can thus be shaped by the joint effects of the three values delivered by all of its offered rewards. Given their distinct incentivizing mechanisms, we further posit that socioemotional value and participatory value will potentially substitute the effects of utilitarian value, thus leading to an inverted U-shaped effect of the combination of the three values on crowdfunding performance. Evidence from a novel multimethod design that integrates field data, topic modeling, and a survey with crowdfunding professionals largely supports our theoretical predictions. Our theoretical framework and empirical findings have important implications for both theory and practice.
How does the socioemotional wealth (SEW) of a family firm affect its deal valuation in acquisition? Using a sample of 515 completed transactions of S&P 500 firms over the period 2003–2016, we examine a number of contexts and find that SEW creates differential valuations of targets by family firms vis-à-vis non-family firms. Particularly from an internationalization perspective, acquisitions may be an ideal option for family firms because foreign acquisitions may be loosely coupled from the core firm. Post-hoc analyses on the heterogeneity in family governance reveal that founder and descendant board chairs may have different perceptions of SEW.
Research summary
The pandemic spread of the coronavirus COVID‐19 is rightly focusing policy‐makers’ attention on saving people's lives. At the same time, the pandemic crisis is threatening the survival of firms at a global scale, with potentially devastating societal and economic outcomes. In this Virtual Special Issue, we gather and discuss key papers published in the journals of the Strategic Management Society that provide insights into firms' potential strategic responses to crisis. Based on our overview, we identify four types of responses: retrenchment, persevering, innovating, and exit. Awareness of these responses has implications for managers and strategy scholars alike.
Managerial summary
How can firms respond to crises such as the current pandemic spread of the coronavirus COVID‐19? This Virtual Special Issue begins to provide answers to this question. Based on a select overview of papers published in the journals of the Strategic Management Society, we advance four types of strategic responses to crisis: retrenchment, persevering, innovating, and exit. Awareness of these responses has implications for managers and strategy scholars alike.
This study examines how the success of reward-based crowdfunding (RBCF) is affected by two narrative styles—namely “results in progress” (RIP) and “ongoing journey” (OJ)—and by the entrepreneur’s RBCF experience. Our findings reveal that greater success in collecting funds is achieved by RBCF campaigns that are communicated through RIP narrative styles rather than OJ styles. Moreover, we have underscored the positive effect brought about by an entrepreneur’s RBCF experience. In addition, we highlight how these two factors interact with each other in their overall effect on successful fundraising through RBFC, showing that entrepreneurs with extensive experience in RBCF attract more pledges by adopting OJ narratives rather than RIP narratives. The outcomes of this study advance the theoretical understanding of success factors in RBCF and provide RBCF entrepreneurs with suggestions regarding the most appropriate narrative style to adopt, depending on their level of experience.
How do new ventures gain legitimacy and attract critical resources? An increasing body of cultural entrepreneurship research highlights an “optimal distinctiveness” trade-off: new ventures need to be distinctive from their peers to stand out, yet distinctiveness counteracts the attainment of organizational legitimacy. In this paper, we challenge the underlying assumption that distinctiveness necessarily counteracts the attainment of legitimacy and propose that distinctiveness can become a source of legitimacy. This proposition matters because it fundamentally alters the relationship between distinctiveness and resource acquisition from certain audiences. We build on these theoretical arguments to examine new ventures’ resource acquisition from crowdfunders, one of the most important audiences for new ventures. Analysis of 28,425 crowdfunding campaigns across 39 market categories strongly supports our arguments, showing that higher levels of distinctiveness lead to superior crowdfunding performance. We further demonstrate that the legitimating effect of distinctiveness intensifies under the absence of alternative sources of legitimacy. Our study contributes by uncovering a new mechanism and three contingencies for the “optimal distinctiveness” trade-off.
We examine how entrepreneurs acquire financial resources for their early-stage ventures from distributed non-professionals via crowdfunding. Through an inductive analysis of entrepreneurs’ successful and unsuccessful non-equity crowdfunding campaigns, we derive a holistic framework of community-based resource mobilization. Our framework consists of three distinct processes entrepreneurs use to attain financial capital from non-professional resource providers over time: community building to establish psychological bonds with individuals possessing domain-relevant knowledge, community engaging to foster social identification with existing resource providers, and community spanning to leverage proofpoints with intermediaries who can help orchestrate resource mobilization with broader audiences. Entrepreneurs’ enactment and temporal sequencing of these three community-related processes distinguish successful versus unsuccessful resource mobilization efforts in a crowdfunding setting. Community building is used by successful entrepreneurs primarily prior to a campaign’s launch, community engaging is used throughout a campaign, and community spanning is most effectively used after achieving a campaign’s initially-stated funding goal. This study empirically illustrates and theoretically conceptualizes the dynamics of resource mobilization in a crowdfunding setting.
Environmental changes can render latent organizational tensions salient, and tensions can be viewed as a lens through which to study the social interactions of organizational actors. This study aims to uncover what kinds of tensions and their entanglements arise in knowledge workers’ collaboration and technology-mediated communication practices during a transition to remote work. The qualitative dataset was collected through an open-ended online survey at the start of the COVID-19 pandemic in 2020 from 569 remote workers, and the data were analyzed iteratively according to thematic content analysis methods and applying elements of contrapuntal analysis. The findings indicate emerging tensions and their entanglements in knowledge workers’ remote work and technology-mediated communication practices, here manifesting in process-, task-, and relationship-oriented interactions. The findings provide theoretical and practical implications for how entangled tensions in remote work could be managed to support effective communication, collaboration, and employee well-being during and beyond the pandemic situation.
Drawing from expectancy violation theory, we investigate how entrepreneurs' language-based expressions of their political ideology influence the performance of their crowdfunding campaigns. We argue that crowdfunding funders expect campaigns to be apolitical, suggesting that entrepreneurs' expressing their political ideologies-regardless of the specific ideology-create a negative expectancy violation that decreases funding performance. As source credibility is a central boundary condition for expectancy violation theory predictions, we also suggest this relationship is mitigated by three indicators of entrepreneurial credibility: prior successful experience, media usage, and third-party endorsements. Using a sample of 19,898 Kickstarter campaigns and a randomized experiment, we find support for our theoretical predictions. Executive summary The role of political ideology has become an important topic in entrepreneurship research (e.g., Maldonado-Bautista et al., 2021; Lewis et al., 2021; Zhou, 2013). Throughout the literature, researchers have generated significant insights showing that entrepreneurs' conservatism and liberalism serve as ideological values that ultimately guide the decisions impacting their new ventures (Chin et al., 2021; Jarrodi et al., 2019). Despite these insights, the current literature informs comparatively less about how entrepreneurs' political ideologies are perceived by others and whether expressing their political ideologies is valued throughout the new venture process. The present research explores these questions by examining how entrepreneurs' expressions of political values shape their ability to attract funding for their new venture via crowdfunding. To develop our conceptual model, we draw from expectancy violations theory (i.e., a perspective that explains how individuals respond to unexpected behavior during communication; Burgoon et al., 2002) and communication research illustrating that discussing politics is seen as unprofessional in business (Gera et al., 2020; Tillman, 2022). Based on this theoretical framework, we suggest that funders in crowdfunding expect entrepreneurs' campaigns to be generally free of political expressions. As such, entrepreneurs hurt their crowdfunding performance by violating this expectation if they express their political ideology-regardless of whether they are expressing a conservative or liberal ideology. We then examine whether the expectation for entrepreneurs to be generally apolitical in their crowdfunding campaigns depends on the credibility of the entrepreneur. Expectancy violations theory suggests that individuals with greater credibility about a topic have 2 greater freedom to violate existing expectations (Burgoon et al., 2002). Following this logic, we also examine three indicators of an entrepreneur's credibility identified in previous crowdfunding research by Courtney et al. (2017) (i.e., entrepreneurial experience, entrepreneurial media usage, third-party endorsements). We contend that these indicators of entrepreneur credibility mitigate the negative influence of political expressions on crowdfunding performance. We test our model using Kickstarter campaigns based in the United States (N = 19,898) and using a randomized experiment (N = 668). Results provide general support for our predictions. Entrepreneurs diminish the amount of funds raised in their crowdfunding campaigns by approximately 9 % and 17 % for every percentage point increase in their expressions of conservatism or liberalism, respectively. The negative influence of political expressions is mitigated when the entrepreneur had more entrepreneurial experience, more media usage in their campaigns, and a third-party endorsement (i.e., Kickstarter's 'Project We Love' badge). We also found strong evidence that funders expect entrepreneurs' crowdfunding campaigns to be apolitical in our randomized experiment and that political expressions lead to perceptions of unprofessionalism among potential funders. The overall results unveil an overlooked reality: in a society in which entrepreneurs are increasingly discussing politics and intertwining it with their businesses (Carothers and O'Donohoue, 2019; Zipkin, 2018), crowdfunding funders expect entrepreneurs to be apolitical. Our study contributes to the literature in three key ways. First, we diverge from the focus on the literature suggesting entrepreneurs' political ideologies serve as values that affect their business decisions and, instead, demonstrate the importance of how entrepreneurs' political ideologies are perceived. Second, we highlight the expectation in crowdfunding that entrepreneurs should generally avoid discussing their political ideologies, but that entrepreneurs with more indications of credibility may be granted greater latitude to discuss their political values. Finally, we contribute back to expectancy violations theory by answering calls to uncover the underlying mechanisms that explain why expectancy violations evoke specific reactions among individuals in certain settings (Bur-goon, 2015) by providing evidence that norms of professionalism form the expectation of apoliticality in crowdfunding campaigns.
As crowdfunding success relies heavily on designing campaigns that attempt to influence potential backers within a fixed time frame, this study leverages signaling theory to explore the time-varying direct and interactive effects of rhetorical (i.e., emotional tone, cognitive tone, communal language style, and linguistic style match) and substantive (i.e., backer support) signals employed in project descriptions on funding formation. Using linguistic inquiry and word count (LIWC) and functional data analysis (FDA), we analyze data on 1245 projects from a rewards-based crowdfunding platform (Kickstarter) and demonstrate that (a) the four rhetorical signals are positively related to funding formation, (b) emotional and cognitive tone exert stronger effects in early phases of projects, whereas linguistic style match and communal language style exert stronger effects in later phases, and (c) the dynamic effects of rhetorical signals on funding formation are greater when the number of backers increases. We conclude with implications for crowdfunding research and insights for improving campaign success.
This research uses a crowdfunding context to examine when and why a simple difference in frame—using “want” versus “need” in the request—affects funders’ compliance with an appeal for contributions. Building on the semantic framing and psycholinguistics literature, we propose that using “want” (versus “need”) signals that the fundraiser is a relatively less (vs. more) dependent person. This perception difference then exerts opposing effects on the two major forms of crowdfunding appeals. For reward-based appeals, in which fundraisers promise a return on contribution, funders have a for-profit (i.e., incentive-seeking) goal and are more willing to contribute to a less dependent fundraiser. In contrast, for donation-based appeals, in which no incentives are promised by the fundraisers, funders are primarily motivated by a non-profit (i.e., helping) goal, and are more willing to contribute to a fundraiser who is seen as more dependent on help. Therefore, we predict that a “want” (“need”) frame is more effective in reward-based (donation-based) crowdfunding. Results from two large-scale observational studies and four experiments support our predictions and also illuminate the underlying mechanisms. Collectively, the findings contribute to the literature on semantic framing and crowdfunding, and also offer practical implications for fundraisers, marketers, and policymakers.
Linguistic attributes in entrepreneurs' funding campaign descriptions play an important role in attracting resources. Going beyond examining the effect of individual linguistic attributes, this study takes a portfolio approach by viewing a narrative as a portfolio or collection of linguistic attributes. Specifically, we posit a narrative as a portfolio of “speech acts” and examine the combined effects of select speech acts based on their variation within a narrative. Speech acts are actions that a communicator performs with their words, such as making an assertion, establishing a commitment, expressing feelings, and directing listeners to evoke certain behaviors. Drawing on the stimuli variation perspective and speech acts theory, we examine how the diversity of and changes in “speech acts” in a narrative can influence funding outcomes. Using a sample of 28,000 crowdfunding campaigns and a supervised machine-learning approach, we find that entrepreneurs who adopt a variety of speech acts and frequently change from one speech act to another in a narrative are more likely to achieve funding success. Results also support inverted U-shaped relationships of individual speech acts with funding success. This study contributes to both the entrepreneurial narratives and resource acquisition literatures.
This paper introduces the concept of missed external enablement as a choice not to act on significant change in the business environment that later proves to be a meaningful accelerant for an entrepreneurial endeavor. There has been little consideration to date of such errors of omission. In response, we model the opacity and the agent intensity of enablement as fuel for inaction, leading to missed enablement. We then specify factors, such as magnitude of the miss, that strengthen or weaken the effect. As this unfolds, entrepreneurs consider how to best respond, and we model various response paths that may increase or decrease subsequent entrepreneurial action, where the path is again influenced by opacity and agent intensity. The theory generated exposes new facets of external enablement. The effects of external change are shrouded in opacity. It is therefore difficult for entrepreneurs to discern whether change benefits one's endeavor and if it does, whether the effort, time, and resources are available to capitalize on it. Hence, it is rather easy to mistakenly choose entrepreneurial inaction. Our theory addresses the complexity and richness of these dynamics as they lead to missed external enablement, and our model outlines specific ways entrepreneurs might respond when they miss out on the benefits of external change. The insights we generate highlight the effects of entrepreneurs’ exposure to many changes in the business environment over time, where the actions of others coupled with one's own past interpretations of the meaning of external changes influence what follows.
Organizations, such as universities, face a variety of adversities, challenges, or disruptions that call for resilience to be enacted. Resilience is an important communicative process that relies on organizations and their stakeholders to collaboratively make sense of and respond to a given adversity, such as the COVID-19 pandemic. In order to identify the shared characteristics that organizations use in their communication surrounding adversity, we completed a genre analysis of the messages created by Big 10 Universities to welcome stakeholders to the 2020–2021 academic year. Through our analysis we uncovered commonalities that make organization-stakeholder resilience discourse distinct—(1) defining a shared relationship, (2) detailing steps to regain a sense of normalcy, and (3) describing the outcome of enacting resilience. Based on these findings, we propose a genre of organization-stakeholder resilience by highlighting the role of communication in cultivating resilience through the emphasis on discursive relationships that exist between organizations and stakeholders.
The presentation of a prototype is pervasive when technology entrepreneurs pitch to potential resource providers. Yet, we know little about how the fidelity of a prototype—the degree to which it approximates the final product—can affect funding decisions. We study the relationship between prototype fidelity and resource acquisition of nascent technology ventures in online crowdfunding. Based on the community logic under which crowdfunding operates and the diverse motivations of funders to participate, we develop the seemingly counterintuitive idea that moderate prototype fidelity is more effective in gaining support from funders than high prototype fidelity. Across our three empirical studies, we find support for the hypothesis that prototype fidelity has an inverted U-shaped relationship with crowdfunding performance. This relationship is moderated by the materiality of the offered rewards and the quality of the prototype presentation delivered through the online interface.
Entrepreneurship scholars argue that effective storytelling is critical to the fundraising process, yet scholars rarely examine how the inclusion of core story elements in resource appeals such as characters, plot, or setting impacts fundraising effectiveness. Drawing from narrative theory and research on narrative analysis, we examine how the inclusion of fundamental story elements impacts fundraising in 359 crowdfunding campaigns. We leverage a fuzzy set qualitative comparative analysis to provide a holistic exploration of how story elements shape funding and reveal five storytelling configurations that yield superior funding performance. We then unpack the theoretical and practical implications of our findings to provide a deeper understanding of storytelling in resource acquisition.
Scholars have devoted significant attention to the role of entrepreneurs' communication, and gender in crowdfunding. Yet, how female and male entrepreneurs can effectively configure their assertive communication style and the role gender norms within project categories play in shaping crowdfunders' evaluations of entrepreneurs' communication style remains unanswered. To address this, we conduct an exploratory qualitative comparative case analysis (QCA) of 1600 entrepreneurs who pitched their ventures on Kickstarter. From prior research, we identified four distinct kinds of assertive language (certain, power, social, tentative) and explore how female and male entrepreneurs' configurations of assertive language relate to crowdfunding success and failure in male-dominated and female-dominated contexts. We found six pitch assertiveness themes, two associated with success, two associated with failure, and two where success versus failure depends on nuanced considerations of the entrepreneur's gender and the gendering of the context. Our study extends our understanding of communication and gender in crowdfunding.
More than 5.89 million people have died from COVID-19. Due to COVID-19, there is a need for organizations to reconsider their structures and systems in response to increased remote working and decreased face-to-face (FTF) interactions. This study analyzes organizational relationships, specifically the supervisor-subordinate relationship. This study examines the link between supervisor-subordinate immediacy and organizational identification in mediated communication. Participants from three nations ( n = 1776) were explored to test the assumption that supervisor-subordinate immediacy explains organizational identification. The United States, Australia, and England were chosen as focal nations due to the differing government responses to the COVID-19 outbreak. Results revealed supervisors’ perceived computer-mediated immediate behaviors and subordinates’ perceived immediacy with their supervisors were positive predictors of organizational identity. U.S. supervisors were perceived to use higher levels of computer-mediated immediacy behaviors and have more perceived immediacy than Australian and English supervisors. Australian supervisors had higher levels of perceived immediacy than English supervisors.
We investigate the impact of market validation on persistence and subsequent performance following a specific type of failure (crowdfunding failure). We leverage a mixed methods design, employing a controlled lab experiment with entrepreneurs (Study 1) and a four-year lagged longitudinal field study which combines two archival databases (Study 2). In our experiment, we find that market validation encourages entrepreneur persistence through affective activation and cognition-based action intentions (specifically search and knowledge integration). We also find that another form of validation, expert validation, strengthens this relationship. In our field study, market validation is shown to be a stronger predictor of performance after a crowdfunding failure in comparison to expert validation. We draw from the social proof and wisdom of the crowd perspectives to develop our theoretical model and explain the implications of our findings.
In two studies, we investigate whether the link between entrepreneurial self-efficacy and entrepreneurial intentions depends on outcome expectations. In Study 1, we exploit the COVID-19-induced lockdown as a natural experiment in a two-wave student sample. We compare the efficacy–intention link in survey responses submitted right before and right after the lockdown. In Study 2, we conceptually replicate and extend the findings via an online vignette experiment. Together, these studies show that a disruption of stable institutionalized outcome expectations implying increasing risk and uncertainty makes self-efficacy a weaker predictor of entrepreneurial intentions, particularly among those with pessimistic perceptions.
We investigate COVID-19 as a disabling and an enabling mechanism for small and mid-size enterprises (SMEs), particularly how SMEs’ crisis strategies might help them through the crisis. SMEs can follow a retrenchment strategy, a persevering strategy, or an innovation strategy, and they can do so narrowly or broadly. Using a representative sample of Danish SMEs, we test how crisis strategies are associated with turnover expectations. We find distinct differences in how effective crisis strategies are linked to turnover expectations, depending on how the crisis affected the SMEs in the first place (i.e., the SMEs were crisis victims, crisis immunes, or crisis exploiters).
Research summary
This research develops and tests an empirical model for crisis management in reward-based crowdfunding. Drawing from the SCCT literature, we identify which crisis response strategy best mitigates a crisis of confidence that arises when backers publicly criticize a reward-based crowdfunding campaign during the live funding period. The results of our experimental study show that by using a rebuild response strategy (i.e., offering compensation, apologizing, and taking responsibility), founders can mitigate the impact of the crisis of confidence on potential backers’ funding intentions. Our study also unravels the underlying mechanisms driving this effect: affective and cognitive perceptions of the product and the founder fully mediate the effect of founders’ response strategies on potential backers’ funding intentions.
Managerial summary
This study investigates crisis management strategies in reward-based crowdfunding. Specifically, we compare the effectiveness of three different response strategies (rebuild, diminish, deny) that founders can adopt when reacting to a publicly visible, negative comment on their crowdfunding page. We test the effects of these strategies in an experiment among 514 participants. Our results show that using a rebuild strategy works better than a diminish or a deny strategy to increase potential backers’ funding intentions, because a rebuild strategy enhances perceived likability and trust, while lowering perceived risk. Since communication strategy is key for the reward-based crowdfunding campaign's ultimate success, we recommend that crowdfunding campaign founders adopt a strategic plan for their public interaction with backers and use an appropriate response strategy.
Project success is critical in the crowdfunding domain. Rather than the existing project‐centric prediction methods, we propose a novel backer‐centric prediction method. We identify each backer's preferences based on their pledge history and calculate the cosine similarity between backer's preferences and the project as each backer's persuasibility. Finally, we aggregate all the backers' persuasibility to predict project success. To validate our method, we crawled data on 183,886 projects launched during or before December 2014 on Kickstarter, a crowdfunding website. We selected 4,922 backers with a total of 442,793 pledges to identify backers' preferences. The results show that a backer is more likely to be persuaded by a project that is more similar to the backer's preferences. Our findings not only demonstrate the efficacy of backers' pledge history for predicting crowdfunding project success but also verify that a backer‐centric method can supplement the existing project‐centric approaches. Our model and findings enable crowdfunding platform agencies, fund‐seeking entrepreneurs, and investors to predict the success of a crowdfunding project.
Existing categories often blend together to form new categories. To date, research has explored noncontroversial forms of category blending, such as smartphones and nanotechnology, even though category blending can frequently represent a highly contentious activity. Through an inductive field study of collegiate-licensed beer, we develop a theoretical model of contentious category blending. We show that contentious category blending related to and invoked tradition in three important ways. First, as contentiousness arises primarily from the participants involved in the category, opponents framed tradition narrowly—around those for whom the category was contentious (e.g., university students). Conversely, proponents framed tradition more broadly by incorporating stories of alumni, farmers, local craft breweries, and community members. By shifting the emphasis on tradition away from the actors for which the category was contentious and toward actors for which the category was appropriate, category proponents were able to establish a more lenient category and success in blending the categories. Second, whereas theory indicates that members of new categories generally seek to illustrate their novelty and distinctiveness from existing categories, we find the opposite among contentious category proponents. Instead, as contentiousness arouses questions about whether a product should exist, proponents draw from history, heritage, and tradition to demonstrate how elements of the product already exist. Third, we find the importance of tradition, culture, and community mean the legitimacy of a blended category does not so easily transfer but instead extends only to those communities that can uniquely stand on the traditions of their own community to gain support.
Entrepreneurs regularly confront resource constraints as they attempt to bring their ideas to fruition. To overcome resource constraints, they often try to mobilize resources from external resource providers and use narratives as a critical tool to do so. We theorize that a particular type of narrative – a resourcefulness narrative – will significantly impact an entrepreneur's ability to mobilize support from resource providers. A resourcefulness narrative is a discursive, temporal account of past or ongoing entrepreneurial actions, whereby an entrepreneur is presented as using, assembling, or deploying resources in creative ways in order to overcome an impediment. We argue that a resourcefulness narrative generates positive emotional and cognitive reactions from external resource providers such that they are inclined to support a venture. Furthermore, these effects are contingent on the general level of resource scarcity or munificence in a venture's environment, the level of uncertainty underpinning the venture, the entrepreneur's experience, and the recency of the actions described within the narrative. By acting resourcefully and transforming that action into a narrative, entrepreneurs can resourcefully mobilize support.
Female entrepreneurs are subjected to stereotypes that make it difficult to secure funding. Crowdfunding challenges many of the causes of this discrimination but we know little about if and how it changes optimal funding strategies for female entrepreneurs. Using a sample of 3191 crowdfunding campaigns by female entrepreneurs, we draw from signaling theory to develop and test a series of counterintuitive conjectures for female crowdfunding success. Our results contradict advice that may be derived from traditional entrepreneurial finance: women in crowdfunding should use their gender as advertising, use more female-centric language, avoid self-promotion, start businesses in male-dominated sectors, and ask for more money. These findings highlight new theoretical mechanisms in crowdfunding and develop recommendations for female entrepreneurs who want to raise funds.
Project funding performance which determines the rise and fall of the crowdfunding platform, is largely governed by the subjective behavior of investors. Leveraging the perspective of attribute substitution theory, we focus on two factors that affect the subjective funding behaviors of investors: emotional language in the project description and risky funding choices of prior investors. According to the same theory, we classify the projects as either hedonic or utilitarian, identifying whether the association between the factors and funding success of projects vary for hedonic vs. utilitarian projects. Using Kickstarter data, our analysis shows a positive association between the risk-seeking investor ratio and project success for hedonic projects. In addition, it identifies a positive association between the extent to which arousal words are used in project descriptions and project success for all projects. Thus, both positive associations are stronger for hedonic projects than for utilitarian projects. Our findings suggest that investors in crowdfunding contexts do not always make rational decisions in funding projects. This has implications for how a project is positioned within the crowdfunding solicitation marketplace.
The daunting effects of COVID‐19 have motivated large firms to rethink supply chain designs and practices. As a potential contribution to such change, we introduce the concept of supply chain entrepreneurial embeddedness (SCEE), which we define as the degree to which a large firm integrates small entrepreneurial business capabilities (e.g., creativity, ingenuity, resourcefulness, rapid decision‐making, and swift execution) within its supply chain. We theorize that SCEE can be realized via at least three mechanisms – acquiring (i.e., purchasing one or more small entrepreneurial firms), allying (i.e., building cooperative alliances with such firms) and assimilating (i.e., mimicking how such firms behave). We suggest that SCEE is valuable under normal conditions, but its value increases under duress. Grounded in the concepts of structural inertia, requisite variety, mutualism, and real options, our core premise is that SCEE enables large firms to better navigate multiple and multi‐directional concurrent changes in supply and demand which in turn enhances firm performance. We contextualize this core premise by theorizing that greater end‐user proximity (wherein SCEE is located close to the final customer) and service centricity (wherein competition is primarily based on the service dimension of product‐service bundles) enhance SCEE’s positive effects.
Although prior research in traditional equity financing shows that male founders are preferred, emerging evidence in low-stakes crowdfunding (e.g., rewards-based crowdfunding) indicates that female entrepreneurs may have an advantage, particularly with female investors. We seek to examine whether investors in high-stakes equity crowdfunding, which includes elements from both traditional equity financing and low-stakes crowdfunding, respond differently to male and female founders. Specifically, we examine whether founder gender preferences, if they exist, vary based on the gender and the experience of the investor. Through a randomized field experiment, we find that inexperienced female investors are significantly more interested (138%) in ventures with female founders than those with male founders; however, we do not observe founder gender preferences among experienced female investors. For male investors, we do not observe differences in interest based on founder gender or investor experience. Thus, we confirm that the gender gaps observed in traditional equity financing are ameliorated in the equity crowdfunding context. Furthermore, we identify a boundary condition to the preference for female founders reported in earlier work involving low-stakes crowdfunding. In high-stakes crowdfunding, investor experience serves as a contingency that reduces female investors’ preference for female founders, potentially because of the weakening effects of activism homophily and the lower reliance on heuristics as investor experience increases.
This paper was accepted by Sridhar Tayur, entrepreneurship and innovation.
Since the early 2000s, research at the intersection of entrepreneurship and strategic management has flourished, as has work at the intersection of strategic management and supply chain management. In contrast, little inquiry has occurred at the intersection of entrepreneurship and supply chain management. This presents a tremendous opportunity, as does the relative lack of work bringing together all three fields. We seek to set the stage for exploiting these opportunities by first describing how incorporating a series of key supply chain concepts—omni-channel, last-mile delivery, supply chain agility, supply chain resiliency, and service recovery—could enrich entrepreneurship research. We then explain how the boundaries of key entrepreneurship concepts—opportunity, entrepreneurial orientation, optimal distinctiveness, bricolage, and fear of failure—could be extended to the supply chain context. Both of these moves bring strategic management concepts into play, as well. In accomplishing our tasks, we draw on examples from how firms attempted to navigate the COVID-19 pandemic via moves spanning entrepreneurship, supply chain management, and strategic management.
Research in the field of risk and crisis communication indicates that large disasters not only cause distress among those affected by a crisis situation but also among the wider public. It is known that feelings of anxiety and dread are rooted in a heuristic interpretation of the situation, and that this leads to elevated stress levels in both the individual and the collective. From the literature on psychosocial behavior, we know that the lack of information, the shortness of guidance on what to do, and the absence of acknowledgement of any emotional distress, all have an immediate negative impact on the individual’s stress level. To tackle this phenomenon, this research looks to communication practices as a way of dealing with this issue during a crisis. The prevailing crisis communication literature suggests its prime aim is to safeguard the sender’s reputation thereby preventing the loss of trust. In our work, we inverted that logic by introducing a crisis communication strategy that focuses on restoring trust by diminishing victims’ and other stakeholders’ stress levels. Based on a case, the Brussels terror attacks (March, 2016), we proved the effectiveness of this approach and the diminishing effect on the population’s stress levels.
Communication is a key determining factor of success in crowdfunding environments. In this paper, we examine the link between language used by founders and the contribution behavior of funders. Particularly, we investigate how verbal cues – money saliency and sustainability intention – in the communication text can affect the size of the contributing crowd and amount raised in the context of Kickstarter. Given the nature of crowdfunding environments (intrinsically motivated stakeholders) and Kickstarter's rewards-based structure, we hypothesize that there is a potential crowding-out effect in which an increased level of money saliency leads to decreased funding contributions and engagement. However, this effect should be weaker among projects that have non-selfish aims or intentions. Our analysis on close to 80,000 Kickstarter campaigns confirms that there is indeed a price to pay for using monetary-related terms in project descriptions but not among projects identified as sustainability oriented.