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http://ssrn.com/abstract=1928168
 
 

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An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets


Gordon Burtch


University of Minnesota - Twin Cities - Carlson School of Management

Anindya Ghose


New York University (NYU) - Leonard N. Stern School of Business

Sunil Wattal


Temple University - Department of Management Information Systems

April 13, 2013

Information Systems Research, Forthcoming

Abstract:     
Crowd-funded markets have recently emerged as a novel source of capital for entrepreneurs. As the economic potential of these markets is now being realized, they are beginning to go mainstream, a trend reflected by the explicit attention crowdfunding has received in the American Jobs Act as a potential avenue for economic growth, as well as the recent focus that regulators such as the U.S. Securities and Exchange Commission have placed upon it. Although the formulation of regulation and policy surrounding crowd-funded markets is becoming increasingly important, the behavior of crowdfunders, an important aspect that must be considered in this formulation effort, is not yet well understood. A key factor that can influence the behavior of crowd funders is information on prior contribution behavior, including the amount and timing of others’ contributions, which is published for general consumption. With that in mind, in this study, we empirically examine social influence in a crowd-funded marketplace for online journalism projects, employing a unique data set that incorporates contribution events and Web traffic statistics for approximately 100 story pitches. This data set allows us to examine both the antecedents and consequences of the contribution process. First, noting that digital journalism is a form of public good, we evaluate the applicability of two competing classes of economic models that explain private contribution toward public goods in the presence of social information: substitution models and reinforcement models. We also propose a new measure that captures both the amount and the timing of others’ contribution behavior: contribution frequency (dollars per unit time). We find evidence in support of a substitution model, which suggests a partial crowding-out effect, where contributors may experience a decrease in their marginal utility from making a contribution as it becomes less important to the recipient. Further, we find that the duration of funding and, more importantly, the degree of exposure that a pitch receives over the course of the funding process, are positively associated with readership upon the story’s publication. This appears to validate the widely held belief that a key benefit of the crowdfunding model is the potential it offers for awareness and attention-building around causes and ventures. This last aspect is a major contribution of the study, as it demonstrates a clear linkage between marketing effort and the success of crowd-funded projects.

Number of Pages in PDF File: 40

Keywords: Electronic Commerce, Crowd Funding, Public Goods, Crowding Out, Social Influence, Entrepreneurial Finance, Internet

JEL Classification: R12, Z11, L17, G21, G24

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Date posted: September 19, 2011 ; Last revised: August 12, 2014

Suggested Citation

Burtch, Gordon and Ghose, Anindya and Wattal, Sunil, An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets (April 13, 2013). Information Systems Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1928168 or http://dx.doi.org/10.2139/ssrn.1928168

Contact Information

Gordon Burtch
University of Minnesota - Twin Cities - Carlson School of Management ( email )
19th Avenue South
Minneapolis, MN 55455
United States
Anindya Ghose (Contact Author)
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States

Sunil Wattal
Temple University - Department of Management Information Systems ( email )
1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

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