Abstract

http://ssrn.com/abstract=2443114
 


 



Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts


Ethan R. Mollick


University of Pennsylvania - Wharton School

Ramana Nanda


Harvard University - Entrepreneurial Management Unit

June 20, 2014

Harvard Business School Entrepreneurial Management Working Paper No. 14-116

Abstract:     
In fields as diverse as technology entrepreneurship and the arts, crowds of interested stakeholders are increasingly responsible for deciding which innovations to fund, a privilege that was previously reserved for a few experts, such as venture capitalists and grant‐making bodies. Little is known about the degree to which the crowd differs from experts in judging which ideas to fund, and, indeed, whether the crowd is even rational in making funding decisions. Drawing on a panel of national experts and comprehensive data from the largest crowdfunding site, we examine funding decisions for proposed theater projects, a category where expert and crowd preferences might be expected to differ greatly. We instead find substantial agreement between the funding decisions of crowds and experts. Where crowds and experts disagree, it is far more likely to be a case where the crowd is willing to fund projects that experts may not. Examining the outcomes of these projects, we find no quantitative or qualitative differences between projects funded by the crowd alone, and those that were selected by both the crowd and experts. Our findings suggest that the democratization of entry that is facilitated by the crowdfunding has the potential to lower the incidence of “false negatives,” by allowing projects the option to receive multiple evaluations and reach out to receptive communities that may not otherwise be represented by experts.

Number of Pages in PDF File: 44

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Date posted: June 1, 2014 ; Last revised: June 28, 2014

Suggested Citation

Mollick, Ethan R. and Nanda, Ramana, Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts (June 20, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 14-116. Available at SSRN: http://ssrn.com/abstract=2443114 or http://dx.doi.org/10.2139/ssrn.2443114

Contact Information

Ethan R. Mollick
University of Pennsylvania - Wharton School ( email )
The Wharton School
Philadelphia, PA 19104-6370
United States

Ramana Nanda (Contact Author)
Harvard University - Entrepreneurial Management Unit ( email )
Boston, MA 02163
United States
HOME PAGE: http://www.people.hbs.edu/rnanda
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