Download this Paper Open PDF in Browser

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

Management Science, Forthcoming

Harvard Business School Working Paper No. 14-116

49 Pages Posted: 1 Jun 2014 Last revised: 27 Aug 2015

Ethan R. Mollick

University of Pennsylvania - Wharton School

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Date Written: August 26, 2015

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 significant 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 crowdfunding can play an important role in complementing expert decisions, particularly in sectors where the crowds are end users, by allowing projects the option to receive multiple evaluations and thereby lowering the incidence of "false negatives."

Keywords: crowdfunding, venture funding, theater, judgement, communities

Suggested Citation

Mollick, Ethan R. and Nanda, Ramana, Wisdom or Madness? Comparing Crowds with Expert Evaluation in Funding the Arts (August 26, 2015). Management Science, Forthcoming; Harvard Business School Working Paper No. 14-116. Available at SSRN: https://ssrn.com/abstract=2443114 or http://dx.doi.org/10.2139/ssrn.2443114

Ethan 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

Paper statistics

Downloads
1,836
Rank
6,791
Abstract Views
9,831