41 Pages Posted: 6 Oct 2015 Last revised: 23 Aug 2017
Date Written: August 23, 2017
Today's crowdfunding raises funds for tiny, private entrepreneurial ventures without granting funders private claims to a project's future value. Rather than “investments,” these are “contributions.” This paper argues that for such crowdfunding neither producer nor consumer surplus – i.e., project quality, in traditional terms – will play a role in determining funding. Private gifts to funders create typically weak incentives to contribute. Specific kinds of non-pecuniary motivations provide main incentives to contribute. We confirm predictions in time-series observational data set on gross contributions, communications and announcements, new version releases and policy changes, and product use from a representative project.
Keywords: Online platforms, crowdfunding, entrepreneurial finance, new ventures, public goods
JEL Classification: G2, G02, H41
Suggested Citation: Suggested Citation
Boudreau, Kevin and Jeppesen, Lars Bo and Reichstein, Toke and Rullani, Francesco, Entrepreneurial Crowdfunding without Private Claims (August 23, 2017). Harvard Business School Strategy Unit Working Paper No. 16-038. Available at SSRN: https://ssrn.com/abstract=2669545 or http://dx.doi.org/10.2139/ssrn.2669545